**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**





**Washington,
      D.C. 20549**







**FORM
      10-Q**








*(Mark
      One)*


**[X]     
      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





**For
      the quarterly period ended June 30, 2005**





**or**





**[  ]     
      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT
      OF 1934**





**For
      the transition period from ________to _________**


**Commission
                  file number:**
              **333-111423****333-11142301******


**CCH
      II, LLC ***


**CCH
      II Capital Corp. ***


*(Exact
      name of registrants as specified in their charters)*





**Delaware**
            
            **03-0511293****Delaware**
            
            **13-4257703***(State
                or other jurisdiction of incorporation or
                organization)*
            
            *(I.R.S.
                Employer Identification
                Number)*





**12405
      Powerscourt Drive**


**St.
      Louis, Missouri   63131**


*(Address
      of principal executive offices including zip code)*





**(314)
      965-0555**


*(Registrants’
      telephone number, including area code)*





Indicate
      by check mark whether the registrants (1) have filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the registrants were
      required to file such reports), and (2) have been subject to such filing
      requirements for the past 90 days. YES [X] NO [  ]





Indicate
      by check mark whether the registrants are accelerated filers (as defined in
      Rule
      12b-2 of the Exchange Act). YES [ ] NO [X]





Indicate
      the number of shares outstanding of each of the issuers' classes of common
      stock, as of the latest practicable date:





All
      of
      the issued and outstanding shares of capital stock of CCH II Capital Corp.
      are
      held by CCH II, LLC. All of the limited liability company membership interests
      of CCH II, LLC are held by CCH I, LLC (a direct wholly
      owned subsidiary
      of Charter Communications Holdings, LLC, a reporting company under the Exchange
      Act). There is no public trading market for any of the aforementioned limited
      liability company membership interests of shares of capital stock.





*
      CCH II,
      LLC and CCH II Capital Corp. meet the conditions set forth in General
      Instruction H(1)(a) and (b) to Form 10-Q and are therefore filing with the
      reduced disclosure format.







Table
          of Contents





**CCH
      II, LLC**


**CCH
      II Capital Corp.**


**Quarterly
      Report on Form 10-Q for the Period ended June 30, 2005**





**Table
      of Contents**





PART
                I. FINANCIAL INFORMATION
            **Page**Item
                1.Financial
                Statements - CCH II, LLC and SubsidiariesCondensed
                Consolidated Balance Sheets as ofJune
                30, 2005and
                December 31, 2004
            4Condensed
                Consolidated Statements of Operations for the three
                and sixmonths
                endedJune
                30, 2005and
                2004
            5Condensed
                Consolidated Statements of Cash Flows for thesix
                months endedJune
                30, 2005and 2004
            6Notes
                to Condensed Consolidated Financial
                Statements
            7Item
                2.Management's
                Discussion and Analysis of Financial Condition and Results of
                Operations
            25Item
                4.Controls
                and Procedures
            41PART
                II. OTHER INFORMATIONItem
                1.Legal
                Proceedings
            42Item
                6.Exhibits
            44SIGNATURES
            45EXHIBIT
                INDEX
            46








This
      quarterly report on Form 10-Q is for the three and six months ended
      June
      30, 2005. The Securities and Exchange Commission ("SEC") allows us to
      "incorporate by reference" information that we file with the SEC, which means
      that we can disclose important information to you by referring you directly
      to
      those documents. Information incorporated by reference is considered to be
      part
      of this quarterly report. In addition, information that we file with the SEC
      in
      the future will automatically update and supersede information contained in
      this
      quarterly report. In this quarterly report, "we," "us" and "our" refer to CCH
      II, LLC and its subsidiaries.








2
 Table
          of Contents





**CAUTIONARY
      STATEMENT REGARDING FORWARD-LOOKING STATEMENTS:**





This quarterly
      report includes
      forward-looking statements within the meaning of Section 27A of the
      Securities Act of 1933, as amended (the " Securities
      Act " ),
      and
      Section 21E of the Securities Exchange Act of 1934, as amended (the " Exchange
      Act " ),
      regarding, among other things, our plans, strategies and prospects, both
      business and financial including, without limitation, the forward-looking
      statements set forth in the " Results
      of Operations " and " Liquidity
      and Capital Resources " sections
      under Part I, Item 2. " Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations " in this quarterly
      report .
      Although we believe that our plans, intentions and expectations reflected in
      or
      suggested by these forward-looking statements are reasonable, we cannot assure
      you that we will achieve or realize these plans, intentions or expectations.
      Forward-looking statements are inherently subject to risks, uncertainties and
      assumptions including, without limitation, the factors described under " Certain
      Trends and Uncertainties " under
      Part I, Item 2. " Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations " in this quarterly
      report .
      Many of
      the forward-looking statements contained in this quarterly
      report may
      be
      identified by the use of forward-looking words such as " believe, "  " expect, "  " anticipate, "  " should, "  " planned, "  " will, "  " may, "  " intend, "  " estimated " and " potential " among
      others. Important factors that could cause actual results to differ materially
      from the forward-looking statements we make in this quarterly
      report are
      set
      forth in this quarterly
      report and
      in
      other reports or documents that we file from time to time with the SEC, and
      include, but are not limited to:





·
            the
                availability of funds to meet interest payment obligations under
                our and
                our parent companies’ debt and to fund our operations and necessary
                capital expenditures, either through cash flows from operating activities,
                further borrowings or other
                sources;


·
            our
                ability to sustain and grow revenues and cash flows from operating
                activities by offering video, high-speed Internet, telephone and
                other
                services and to maintain a stable customer base, particularly in
                the face
                of increasingly aggressive competition from other service
                providers;


·
            our
                and our parent companies’ ability to comply with all covenants in our and
                our parent companies’ indentures and credit facilities, any violation of
                which would result in a violation of the applicable facility or indenture
                and could trigger a default of other obligations under cross-default
                provisions;


·
            our
                and our parent companies’ ability to pay or refinance debt as it becomes
                due;


·
            our
                ability to obtain programming at reasonable prices or to pass programming
                cost increases on to our customers;


·
            general
                business conditions, economic uncertainty or slowdown;
                and


·
            the
                effects of governmental regulation, including but not limited to
                local
                franchise authorities, on our business.





All
      forward-looking statements attributable to us or any person acting on our behalf
      are expressly qualified in their entirety by this cautionary statement. We
      are
      under no duty or obligation to update any of the forward-looking statements
      after the date of this quarterly
      report .








3
 Table
          of Contents


**PART
      I. FINANCIAL INFORMATION.**







**Item
      1.**  **Financial
      Statements.**





**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(DOLLARS
      IN MILLIONS)**





**June
                30****,**
            
            **December
                31,****2005**
            
            **2004****(Unaudited)****ASSETS**CURRENT
                ASSETS:Cash
                and cash equivalents
            
            $
            22
            
            $
            546Accounts
                receivable, less allowance for doubtful accounts of$14
                and $15, respectively
            
            
            180
            
            
            175Prepaid
                expenses and other current assets
            
            
            17
            
            
            20Total
                current assets
            
            
            219
            
            
            741INVESTMENT
                IN CABLE PROPERTIES:Property,
                plant and equipment, net of accumulateddepreciation
                of $6,026 and $5,142, respectively
            
            
            6,033
            
            
            6,110Franchises,
                net
            
            
            9,839
            
            
            9,878Total
                investment in cable properties, net
            
            
            15,872
            
            
            15,988OTHER
                NONCURRENT ASSETS
            
            
            265
            
            
            250Total
                assets
            
            $
            16,356
            
            $
            16,979**LIABILITIES
                AND MEMBER’S EQUITY**CURRENT
                LIABILITIES:Accounts
                payable and accrued expenses
            
            $
            947
            
            $
            949Payables
                to related party
            
            
            156
            
            
            30Total
                current liabilities
            
            
            1,103
            
            
            979LONG-TERM
                DEBT
            
            
            10,045
            
            
            9,895LOANS
                PAYABLE - RELATED PARTY
            
            
            62
            
            
            29DEFERRED
                MANAGEMENT FEES - RELATED PARTY
            
            
            14
            
            
            14OTHER
                LONG-TERM LIABILITIES
            
            
            477
            
            
            493MINORITY
                INTEREST
            
            
            662
            
            
            656MEMBER’S
                EQUITY:Member’s
                equity
            
            
            3,998
            
            
            4,928Accumulated
                other comprehensive loss
            
            
            (5
            )
            
            (15
            )Total
                member’s equity
            
            
            3,993
            
            
            4,913Total
                liabilities and member’s equity
            
            $
            16,356
            
            $
            16,979


The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 4
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          of Contents


**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED**  **CONSOLIDATED
      STATEMENTS OF OPERATIONS**


**(DOLLARS
      IN MILLIONS)**


**Unaudited**








**Three
                Months Ended****June
                30****,**
            
            **Six
                Months Ended****June
                30****,****2005**
            
            **2004**
            
            **2005**
            
            **2004**REVENUES
            
            $
            1,323
            
            $
            1,239
            
            $
            2,594
            
            $
            2,453COSTS
                AND EXPENSES:Operating
                (excluding depreciation and amortization)
            
            
            569
            
            
            515
            
            
            1,128
            
            
            1,027Selling,
                general and administrative
            
            
            256
            
            
            244
            
            
            493
            
            
            483Depreciation
                and amortization
            
            
            378
            
            
            364
            
            
            759
            
            
            734Asset
                impairment charges
            
            
            8
            
            
            --
            
            
            39
            
            
            --(Gain)
                loss on sale of assets, net
            
            
            --
            
            
            2
            
            
            4
            
            
            (104
            )Option
                compensation expense, net
            
            
            4
            
            
            12
            
            
            8
            
            
            26Special
                charges, net
            
            
            (2
            )
            
            87
            
            
            2
            
            
            971,213
            
            
            1,224
            
            
            2,433
            
            
            2,263Income
                from operations
            
            
            110
            
            
            15
            
            
            161
            
            
            190OTHER
                INCOME AND EXPENSES:Interest
                expense, net
            
            
            (210
            )
            
            (179
            )
            
            (408
            )
            
            (342
            )Gain
                (loss) on derivative instruments and hedging activities,
                net
            
            
            (1
            )
            
            63
            
            
            26
            
            
            56Loss
                on extinguishment of debt
            
            
            (1
            )
            
            (21
            )
            
            (6
            )
            
            (21
            )Gain
                on investments
            
            
            20
            
            
            1
            
            
            21
            
            
            --(192
            )
            
            (136
            )
            
            (367
            )
            
            (307
            )Loss
                before minority interest and income taxes
            
            
            (82
            )
            
            (121
            )
            
            (206
            )
            
            (117
            )MINORITY
                INTEREST
            
            
            (3
            )
            
            (6
            )
            
            (6
            )
            
            (9
            )Loss
                before income taxes
            
            
            (85
            )
            
            (127
            )
            
            (212
            )
            
            (126
            )INCOME
                TAX EXPENSE
            
            
            (2
            )
            
            (3
            )
            
            (8
            )
            
            (4
            )Net
                loss
            
            $
            (87
            )
            $
            (130
            )
            $
            (220
            )
            $
            (130
            )


The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 5
 Table
          of Contents


**CCH
      II, LLC AND SUBSIDIARIES**


**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(DOLLARS
      IN MILLIONS)**


**Unaudited**


**Six
                Months Ended****June
                30,****2005**
            
            **2004**CASH
                FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (220
            )
            $
            (130
            )Adjustments
                to reconcile net loss to net cash flows from operating
                activities:Minority
                interest
            
            
            6
            
            
            9Depreciation
                and amortization
            
            
            759
            
            
            734Asset
                impairment charges
            
            
            39
            
            
            --Option
                compensation expense, net
            
            
            8
            
            
            23Special
                charges, net
            
            
            (2
            )
            
            85Noncash
                interest expense
            
            
            14
            
            
            8Gain
                on derivative instruments and hedging activities, net
            
            
            (26
            )
            
            (56
            )(Gain)
                loss on sale of assets, net
            
            
            4
            
            
            (104
            )Loss
                on extinguishment of debt
            
            
            --
            
            
            18Gain
                on investments
            
            
            (21
            )
            
            --Deferred
                income taxes
            
            
            5
            
            
            2Other,
                net
            
            
            --
            
            
            (5
            )Changes
                in operating assets and liabilities, net of effects from
                dispositions:Accounts
                receivable
            
            
            (10
            )
            
            (1
            )Prepaid
                expenses and other assets
            
            
            (21
            )
            
            (4
            )Accounts
                payable, accrued expenses and other
            
            
            (46
            )
            
            (127
            )Receivables
                from and payables to related party, including deferred management
                fees
            
            
            (20
            )
            
            (50
            )Net
                cash flows from operating activities
            
            
            469
            
            
            402CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchases
                of property, plant and equipment
            
            
            (542
            )
            
            (380
            )Change
                in accrued expenses related to capital expenditures
            
            
            48
            
            
            (38
            )Proceeds
                from sale of assets
            
            
            8
            
            
            727Purchases
                of investments
            
            
            (1
            )
            
            --Proceeds
                from investments
            
            
            16
            
            
            --Other,
                net
            
            
            (1
            )
            
            (2
            )Net
                cash flows from investing activities
            
            
            (472
            )
            
            307CASH
                FLOWS FROM FINANCING ACTIVITIES:Borrowings
                of long-term debt
            
            
            635
            
            
            2,812Borrowings
                from related parties
            
            
            140
            
            
            --Repayments
                of long-term debt
            
            
            (819
            )
            
            (3,159
            )Repayments
                to related parties
            
            
            (107
            )
            
            --Payments
                for debt issuance costs
            
            
            (3
            )
            
            (97
            )Distributions
            
            
            (367
            )
            
            (262
            )Net
                cash flows from financing activities
            
            
            (521
            )
            
            (706
            )NET
                INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
            
            
            (524
            )
            
            3CASH
                AND CASH EQUIVALENTS, beginning of period
            
            
            546
            
            
            85CASH
                AND CASH EQUIVALENTS, end of period
            
            $
            22
            
            $
            88CASH
                PAID FOR INTEREST
            
            $
            390
            
            $
            328NONCASH
                TRANSACTIONS:Issuance
                of debt by Charter Communications Operating, LLC
            
            $
            333
            
            $
            --Distribution
                of Charter Communications Holdings, LLC notes and accrued
                interest
            
            $
            (343
            )
            $
            --Transfer
                of property, plant and equipment from parent company
            
            $
            139
            
            $
            --





The
            accompanying notes are an integral part of these condensed consolidated
            financial statements.
 6
 Table
          of Contents


**CCH
        II, LLC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
        in millions)**




**1.**
            **Organization
                and Basis of Presentation**





CCH
      II, LLC("CCH II") is a holding company whose primary assets
      at June 30, 2005 are equity interests in its operating subsidiaries. CCH II
      is a
      subsidiary of CCH I, LLC ("CCH I"). CCH I is a subsidiary of Charter
      Communications Holdings, LLC ("Charter Holdings"). Charter Holdings is a
      subsidiary of Charter Communications Holding Company, LLC ("Charter Holdco"),
      which is a subsidiary of Charter Communications, Inc. ("Charter"). CCH II is
      the
      sole owner of CCO Holdings, LLC ("CCO Holdings"), which in turn is sole owner
      of
      Charter Communications Operating, LLC ("Charter Operating"). The condensed
      consolidated financial statements include the accounts of CCH II and all of
      its
      direct and indirect subsidiaries where the underlying operations reside,
      collectively referred to herein as the "Company." All significant intercompany
      accounts and transactions among consolidated entities have been eliminated.
      The
      Company is a broadband communications company operating in the United States.
      The Company offers its customers traditional cable video programming (analog
      and
      digital video) as well as high-speed Internet services and, in some areas,
      advanced broadband services such as high definition television, video on demand
      and telephone. The Company sells its cable video programming, high-speed
      Internet and advanced broadband services on a subscription basis. The Company
      also sells local advertising on satellite-delivered networks.





The
      accompanying condensed consolidated financial statements of the Company have
      been prepared in accordance with accounting principles generally accepted in
      the
      United States for interim financial information and the rules and regulations
      of
      the Securities and Exchange Commission ("SEC"). Accordingly, certain information
      and footnote disclosures typically included in CCH II’s Annual Report on Form
      10-K have been condensed or omitted for this quarterly report. The accompanying
      condensed consolidated financial statements are unaudited and are subject to
      review by regulatory authorities. However, in the opinion of management, such
      financial statements include all adjustments, which consist of only normal
      recurring adjustments, necessary for a fair presentation of the results for
      the
      periods presented. Interim results are not necessarily indicative of results
      for
      a full year.




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Areas involving significant judgments and estimates include
      capitalization of labor and overhead costs; depreciation and amortization costs;
      impairments of property, plant and equipment, franchises and goodwill; income
      taxes; and contingencies. Actual results could differ from those
      estimates.




*Reclassifications*




Certain
      2004 amounts have been reclassified to conform with the 2005
      presentation.





**2.**
            **Liquidity
                and Capital Resources**





The
      Company incurred net loss of $87 million and $130 million for the three months
      ended June 30, 2005 and 2004, respectively, and $220 million and $130 million
      for the six months ended June 30, 2005 and 2004, respectively. The Company’s net
      cash flows from operating activities were $469 million and $402 million for
      the
      six months ended June 30, 2005 and 2004, respectively.





The
      Company's long-term financing as of June 30, 2005 consists of $5.4 billion
      of
      credit facility debt and $4.6 billion accreted value of high-yield notes. For
      the remainder of 2005, $15 million of the Company’s debt matures, and in 2006,
      an additional $30 million of the Company’s debt matures. In 2007 and beyond,
      significant additional amounts will become due under the Company’s remaining
      long-term debt obligations.





The
      Company has historically required significant cash to fund debt service costs,
      capital expenditures and ongoing operations. Historically, the Company has
      funded these requirements through cash flows from operating activities,
      borrowings under its credit facilities, equity contributions from its parent
      companies, borrowings from its parent companies, sales of assets, issuances
      of
      debt securities and from cash on hand. However, the mix of funding sources
      changes from period to period. For the six months ended June 30, 2005, the
      Company generated $469 million of net




7
 Table
          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


cash
      flows from operating activities, after paying cash interest of $390 million.
      In
      addition, the Company used approximately $542 million for purchases of property,
      plant and equipment. Finally, the Company had net cash flows used in financing
      activities of $521 million, which included, among other things, approximately
      $705 million in repayment of borrowings under the Company’s revolving credit
      facility. This repayment was the primary reason cash on hand decreased by $524
      million to $22 million at June 30, 2005.





The
      Company expects that cash on hand, cash flows from operating activities and
      the
      amounts available under its credit facilities will be adequate to meet its
      and
      its parent companies’ cash needs for the remainder of 2005. Cash flows from
      operating activities and amounts available under the Company’s credit facilities
      may not be sufficient to fund the Company’s operations and satisfy its and its
      parent companies’ principal repayment obligations that come due in 2006 and, the
      Company believes, will not be sufficient to fund its operations and satisfy
      such
      repayment obligations thereafter.





It
      is
      likely that the Company and its parent companies will require additional funding
      to repay debt maturing after 2006. The Company has been advised that Charter
      is
      working with its financial advisors to address such funding requirements.
      However, there can be no assurance that such funding will be available to the
      Company. Although Mr. Allen and his affiliates have purchased equity from
      Charter and Charter Holdco in the past, Mr. Allen and his affiliates are not
      obligated to purchase equity from, contribute to or loan funds to Charter,
      Charter Holdco or the Company in the future.





***Credit
      Facilities and Covenants***





The
      Company’s ability to operate depends upon, among other things, its continued
      access to capital, including credit under the Charter Operating credit
      facilities. These credit facilities, along with the Company’s indentures,
      contain certain restrictive covenants, some of which require the Company to
      maintain specified financial ratios and meet financial tests and to provide
      audited financial statements with an unqualified opinion from the Company’s
      independent auditors. As of June 30, 2005, the Company was in compliance with
      the covenants under its indentures and credit facilities and the Company expects
      to remain in compliance with those covenants for the next twelve months. As
      of
      June 30, 2005, the Company had borrowing availability under the credit
      facilities of $870 million, none of which was restricted due to covenants.
      Continued access to the Company’s credit facilities is subject to the Company
      remaining in compliance with the covenants of these credit facilities, including
      covenants tied to the Company’s operating performance. If the Company’s
      operating performance results in non-compliance with these covenants, or if
      any
      of certain other events of non-compliance under these credit facilities or
      indentures governing the Company’s debt occurs, funding under the credit
      facilities may not be available and defaults on some or potentially all of
      the
      Company’s debt obligations could occur. An event of default under the covenants
      governing any of the Company’s debt instruments could result in the acceleration
      of its payment obligations under that debt and, under certain circumstances,
      in
      cross-defaults under its other debt obligations, which could have a material
      adverse effect on the Company’s consolidated financial condition or results of
      operations.





The
      Charter Operating credit facilities required the Company to redeem the CC V
      Holdings, LLC notes as a result of the Charter Holdings leverage ratio becoming
      less than 8.75 to 1.0. In satisfaction of this requirement, in March 2005,
      CC V
      Holdings, LLC redeemed all of its outstanding notes, at 103.958% of principal
      amount, plus accrued and unpaid interest to the date of redemption. The total
      cost of the redemption including accrued and unpaid interest was approximately
      $122 million. The Company funded the redemption with borrowings under the
      Charter Operating credit facilities.





***Parent
      Companies’ Debt Obligations***





Any
      financial or liquidity problems of the Company’s parent companies could cause
      serious disruption to the Company's business and have a material adverse effect
      on the Company’s business and results of operations. A failure by Charter
      Holdings to satisfy its debt payment obligations or a bankruptcy filing with
      respect to Charter Holdings would give the lenders under the Charter Operating
      credit facilities the right to accelerate the payment obligations under these
      facilities. Any such acceleration would be a default under the indenture
      governing the Company’s notes.




8
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          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


A s
      of June
      30, 2005, Charter had approximately $888 million principal amount of senior
      convertible notes outstanding with approximately $25 million and $863 million
      maturing in 2006 and 2009, respectively. During
      the six months ended June 30, 2005, the
      Company distributed $367 million to Charter Holdings of which $60 million was
      subsequently distributed to Charter Holdco . As of
      June 30, 2005, Charter Holdco was owed $62 million in intercompany loans from
      its subsidiaries, which amount was available to pay interest and principal
      on
      Charter's convertible senior notes.  In
      addition, Charter
      has $122 million of governmental securities pledged as security for the next
      five semi-annual interest payments on Charter’s 5.875% convertible senior
      notes.





A s
      of June
      30, 2005, Charter Holdings had approximately $8.5 billion principal amount
      of
      high-yield notes outstanding with approximately $105 million, $3.4 billion
      and
      $5.0 billion maturing in 2007, 2009 and thereafter, respectively. Charter and
      Charter Holdings will need to raise additional capital or receive distributions
      or payments from the Company in order to satisfy their debt obligations.
      However, because of their significant indebtedness, the ability of the parent
      companies to raise additional capital at reasonable rates is uncertain.
      Distributions by Charter’s subsidiaries to a parent company (including Charter,
      Charter Holdco and Charter Holdings) for
      payment of principal on the parent companies’ debt obligations ,
      however, are restricted by the indentures governing the CCH II notes, CCO
      Holdings notes, and Charter Operating notes, unless
      under their respective indentures there is no default and a specified leverage
      ratio test is met at the time of such event.





In
      accordance with the registration rights agreement entered into with their
      initial sale, Charter was required to register for resale by April 21, 2005
      its
      5.875% convertible senior notes due 2009, issued in November 2004. Since these
      convertible notes were not registered by that date, Charter paid or will pay
      liquidated damages totaling $0.5 million through July 14, 2005, the day prior
      to
      the effective date of the registration statement. In addition, in accordance
      with the share lending agreement entered into in connection with the initial
      sale of its 5.875% convertible senior notes due 2009, Charter was required
      to
      register by April 1, 2005 150 million shares of its Class A common stock that
      Charter was obligated to lend to Citigroup Global Markets Limited ("CGML")
      at
      CGML’s request. Because this registration statement was not declared effective
      by such date, Charter paid or will pay liquidated damages totaling $11 million
      from April 2, 2005 through July 17, 2005, the day before the effective date
      of
      the registration statement. The liquidated damages were recorded as interest
      expense in Charter’s condensed consolidated statements of
      operations.





***Specific
      Limitations at Charter Holdings***





The
      indentures governing the Charter Holdings notes permit Charter Holdings to
      make
      distributions to Charter Holdco for payment of interest or principal on the
      convertible senior notes, only if, after giving effect to the distribution,
      Charter Holdings can incur additional debt under the leverage ratio of 8.75
      to
      1.0, there is no default under Charter Holdings’ indentures and other specified
      tests are met. For the quarter ended June
      30,
      2005, t here
      was
      no default under Charter Holdings’ indentures and other specified tests were
      met. However, Charter Holdings did not meet the leverage ratio of 8.75 to 1.0
      based on June
      30 ,
      2005
      financial results. As a result, distributions from Charter Holdings to Charter
      or Charter Holdco are currently restricted and will continue to be restricted
      until that test is met.  During
      this restriction period ,
      the
      indentures governing the Charter Holdings notes permit Charter Holdings and
      its
      subsidiaries to make specified investments in Charter Holdco or Charter, up
      to
      an amount determined by a formula, as long as there is no default under the
      indentures.





**3.**
            **Sale
                of Assets**





As
      of
      June 30, 2005, the Company has concluded it is probable that three pending
      cable
      asset sales, representing approximately 33,000 customers, will close within
      the
      next twelve months thus meeting the criteria for assets held for sale under
      Statement of Financial Accounting Standards ("SFAS") No. 144, *Accounting
      for the Impairment or Disposal of Long-Lived Assets* .
      As such
      the assets were written down to fair value less estimated costs to sell
      resulting in asset impairment charges during the three and six months ended
      June
      30, 2005 of approximately $8 million and $39 million, respectively. At June
      30,
      2005 assets held for sale, included in investment in cable properties, are
      approximately $40 million.





9
 Table
          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


In
      March
      2004, the Company closed the sale of certain cable systems in Florida,
      Pennsylvania, Maryland, Delaware and West Virginia to Atlantic Broadband
      Finance, LLC. The Company closed the sale of an additional cable system in
      New
      York to Atlantic Broadband Finance, LLC in April 2004. These transactions
      resulted in a $106 million pretax gain recorded as a gain on sale of assets
      in
      the Company’s consolidated statements of operations. The total net proceeds from
      the sale of all of these systems were approximately $735 million. The proceeds
      were used to repay a portion of amounts outstanding under the Company’s
      revolving credit facility.





Gain
      on
      investments for the three and six months ended June 30, 2005 primarily
      represents a
      gain
      realized on an exchange of the Company’s interest in an equity investee for an
      investment in a larger enterprise.





**4.**
            **Franchises
                and Goodwill**





Franchise
      rights represent the value attributed to agreements with local authorities
      that
      allow access to homes in cable service areas acquired through the purchase
      of
      cable systems. Management estimates the fair value of franchise rights at the
      date of acquisition and determines if the franchise has a finite life or an
      indefinite-life as defined by SFAS No. 142, *Goodwill
      and Other Intangible Assets* . Franchises
      that qualify for indefinite-life treatment under SFAS No. 142 are tested
      for impairment annually based on valuations, or more frequently as warranted
      by
      events or changes in circumstances. Such test resulted in a total franchise
      impairment of approximately $3.3 billion during the third quarter of 2004.
      Franchises are aggregated into essentially inseparable asset groups to conduct
      the valuations. The asset groups generally represent geographic clustering
      of
      the Company’s cable systems into groups by which such systems are managed.
      Management believes such grouping represents the highest and best use of those
      assets.





The
      Company’s valuations, which are based on the present value of projected after
      tax cash flows, result in a value of property, plant and equipment, franchises,
      customer relationships and its total entity value. The value of goodwill is
      the
      difference between the total entity value and amounts assigned to the other
      assets.





Franchises,
      for valuation purposes, are defined as the future economic benefits of the
      right
      to solicit and service potential customers (customer marketing rights), and
      the
      right to deploy and market new services such as interactivity and telephone
      to
      the potential customers (service marketing rights). Fair value is determined
      based on estimated discounted future cash flows using assumptions consistent
      with internal forecasts. The franchise after-tax cash flow is calculated as
      the
      after-tax cash flow generated by the potential customers obtained and the new
      services added to those customers in future periods. The sum of the present
      value of the franchises’ after-tax cash flow in years 1 through 10 and the
      continuing value of the after-tax cash flow beyond year 10 yields the fair
      value
      of the franchise.





The
      Company follows the guidance of EITF Issue 02-17, *Recognition
      of Customer Relationship Intangible Assets Acquired in a Business Combination,* in
      valuing customer relationships. Customer relationships, for valuation purposes,
      represent the value of the business relationship with existing customers and
      are
      calculated by projecting future after-tax cash flows from these customers
      including the right to deploy and market additional services such as
      interactivity and telephone to these customers. The present value of these
      after-tax cash flows yields the fair value of the customer relationships.
      Substantially all acquisitions occurred prior to January 1, 2002. The Company
      did not record any value associated with the customer relationship intangibles
      related to those acquisitions. For acquisitions subsequent to January 1, 2002
      the Company did assign a value to the customer relationship intangible, which
      is
      amortized over its estimated useful life.





10
 Table
          of Contents


**CCH
        II, LLC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
        in millions)**


As
      of
      June 30, 2005 and December 31, 2004, indefinite-lived and finite-lived
      intangible assets are presented in the following table:





**June
                30, 2005**
            
            **December 31,
                2004****Gross**
              **Carrying**
              **Amount**
            
            **Accumulated**
              **Amortization**
            
            **Net**
              **Carrying**
              **Amount**
            
            **Gross**
              **Carrying**
              **Amount**
            
            **Accumulated
                Amortization**
            
            **Net**
              **Carrying**
              **Amount****Indefinite-lived
                intangible assets:**Franchises
                with indefinite lives
            
            $
            9,806
            
            $
            --
            
            $
            9,806
            
            $
            9,845
            
            $
            --
            
            $
            9,845Goodwill
            
            
            52
            
            
            --
            
            
            52
            
            
            52
            
            
            --
            
            
            52$
            9,858
            
            $
            --
            
            $
            9,858
            
            $
            9,897
            
            $
            --
            
            $
            9,897**Finite-lived
                intangible assets:**Franchises
                with finite lives
            
            $
            39
            
            $
            6
            
            $
            33
            
            $
            37
            
            $
            4
            
            $
            33





Franchises
      with indefinite lives decreased $39 million as a result of the asset impairment
      charges recorded related to three pending cable asset sales (see Note 3).
      Franchise amortization expense for the three and six months ended June 30,
      2005
      and 2004 was $1 million and $2 million, respectively, which represents the
      amortization relating to franchises that did not qualify for indefinite-life
      treatment under SFAS No. 142, including costs associated with franchise
      renewals. The Company expects that amortization expense on franchise assets
      will
      be approximately $3 million annually for each of the next five years. Actual
      amortization expense in future periods could differ from these estimates as
      a
      result of new intangible asset acquisitions or divestitures, changes in useful
      lives and other relevant factors.





**5.**
            **Accounts
                Payable and Accrued
                Expenses**





Accounts
      payable and accrued expenses consist of the following as of June 30, 2005 and
      December 31, 2004:





**June
                30,**
              **2005**
            
            **December 31,**
              **2004**Accounts
                payable - trade
            
            $
            82
            
            $
            138Accrued
                capital expenditures
            
            
            108
            
            
            60Accrued
                expenses:Interest
            
            
            153
            
            
            149Programming
                costs
            
            
            285
            
            
            278Franchise-related
                fees
            
            
            54
            
            
            67Compensation
            
            
            65
            
            
            47Other
            
            
            200
            
            
            210$
            947
            
            $
            949





11
 Table
          of Contents
 **CCH
            II, LLC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
            in millions)**


**6.**
            **Long-Term
                Debt**





Long-term
      debt consists of the following as of June
      30,
      2005 and
      December 31, 2004:





**June
                30, 2005**
            
            **December
                31, 2004****Face
                Value**
            
            **Accreted
                Value**
            
            **Face
                Value**
            
            **Accreted
                Value****Long-Term
                Debt**CCH
                II, LLC:10.250%
                senior notes due 2010
            
            $
            1,601
            
            $
            1,601
            
            $
            1,601
            
            $
            1,601CCO
                Holdings, LLC:83⁄4%
                senior notes due 2013
            
            
            500
            
            
            500
            
            
            500
            
            
            500Senior
                floating rate notes due 2010
            
            
            550
            
            
            550
            
            
            550
            
            
            550Charter
                Operating:8%
                senior second lien notes due 2012
            
            
            1,100
            
            
            1,100
            
            
            1,100
            
            
            1,1008
                3/8% senior second lien notes due 2014
            
            
            733
            
            
            733
            
            
            400
            
            
            400Renaissance
                Media Group LLC:10.000%
                senior discount notes due 2008
            
            
            114
            
            
            116
            
            
            114
            
            
            116CC
                V Holdings:11.875%
                senior discount notes due 2008
            
            
            --
            
            
            --
            
            
            113
            
            
            113**Credit
                Facilities**Charter
                Operating
            
            
            5,445
            
            
            5,445
            
            
            5,515
            
            
            5,515$
            10,043
            
            $
            10,045
            
            $
            9,893
            
            $
            9,895





The
      accreted values presented above represent the face value of the notes less
      the
      original issue discount at the time of sale plus the accretion to the balance
      sheet date.





In
      March
      and June 2005, Charter Operating consummated exchange transactions with a small
      number of institutional holders of Charter Holdings 8.25% senior notes due
      2007
      pursuant to which Charter Operating issued, in private placements, approximately
      $333 million principal amount of new notes with terms identical to Charter
      Operating's 8.375% senior second lien notes due 2014 in exchange for
      approximately $346 million of the Charter Holdings 8.25% senior notes due 2007.
      The Charter Holdings notes received in the exchange were thereafter distributed
      to Charter Holdings and cancelled.





In
      March
      2005, Charter’s subsidiary, CC V Holdings, LLC, redeemed all of its 11.875%
      notes due 2008, at 103.958% of principal amount, plus accrued and unpaid
      interest to the date of redemption. The total cost of redemption was
      approximately $122 million and was funded through borrowings under the Charter
      Operating credit facilities. The redemption resulted in a loss on extinguishment
      of debt for the six months ended June 30, 2005 of approximately $5 million. Following
      such redemption, CC V Holdings, LLC and its subsidiaries (other than
      non-guarantor subsidiaries) guaranteed the Charter Operating credit facilities
      and granted a lien on all of their assets as to which a lien can be perfected
      under the Uniform Commercial Code by the filing of a financing
      statement.





**7.**
            **Minority
                Interest**





Minority
      interest on the Company’s consolidated balance sheets represents preferred
      membership interests in CC VIII, LLC ("CC VIII"), an indirect subsidiary of
      CCH
      II. As more fully described in Note 17, this preferred interest arises from
      the
      approximately $630 million of preferred membership units issued by CC
      VIII
      in connection with an acquisition in February 2000 and continues to be the
      subject of a dispute between Charter and Mr. Paul G. Allen, Charter’s Chairman
      and controlling shareholder. Generally, operating earnings or losses are
      allocated to the minority owner based on its ownership percentage, thereby
      increasing or decreasing the Company’s net loss, respectively. To the extent
      they relate to CC VIII, the allocations of earnings or losses are subject to
      adjustment based on the ultimate resolution of this disputed ownership. Due
      to
      the uncertainties related to the ultimate resolution, effective January 1,






12
 Table
          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


2005,
      the
      Company ceased recognizing minority interest in earnings or losses of CC VIII
      for financial reporting purposes until such time as the resolution of the matter
      is determinable or other events occur. For the three and six months ended June
      30, 2005, the Company’s results include income of $8 million and $17 million,
      respectively, attributable to CC VIII.





**8.**
            **Comprehensive
                Loss**





Certain
      marketable equity securities are classified as available-for-sale and reported
      at market value with unrealized gains and losses recorded as accumulated other
      comprehensive loss on the accompanying condensed consolidated balance sheets.
      Additionally, the Company reports changes in the fair value of interest rate
      agreements designated as hedging the variability of cash flows associated with
      floating-rate debt obligations, that meet the effectiveness criteria of SFAS
      No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      in
      accumulated other comprehensive loss. Comprehensive loss for the three months
      ended June 30, 2005 and 2004 was $86 million and $99 million, respectively,
      and
      $210 million and $101 million for the six months ended June 30, 2005 and 2004,
      respectively.





**9.**
            **Accounting
                for Derivative Instruments and Hedging
                Activities**





The
      Company uses interest rate risk management derivative instruments, such as
      interest rate swap agreements and interest rate collar agreements (collectively
      referred to herein as interest rate agreements) to manage its interest costs.
      The Company’s policy is to manage interest costs using a mix of fixed and
      variable rate debt. Using interest rate swap agreements, the Company has agreed
      to exchange, at specified intervals through 2007, the difference between fixed
      and variable interest amounts calculated by reference to an agreed-upon notional
      principal amount. Interest rate collar agreements are used to limit the
      Company’s exposure to and benefits from interest rate fluctuations on variable
      rate debt to within a certain range of rates.





The
      Company does not hold or issue derivative instruments for trading purposes.
      The
      Company does, however, have certain interest rate derivative instruments that
      have been designated as cash flow hedging instruments. Such instruments
      effectively convert variable interest payments on certain debt instruments
      into
      fixed payments. For qualifying hedges, SFAS No. 133 allows derivative
      gains
      and losses to offset related results on hedged items in the consolidated
      statement of operations. The Company has formally documented, designated and
      assessed the effectiveness of transactions that receive hedge accounting. For
      the three months ended June 30, 2005 and 2004, net gain (loss) on derivative
      instruments and hedging activities includes gains of $0 and $3 million,
      respectively, and for the six months ended June 30, 2005 and 2004, net gain
      (loss) on derivative instruments and hedging activities includes gains of $1
      million and $2 million, respectively, which represent cash flow hedge
      ineffectiveness on interest rate hedge agreements arising from differences
      between the critical terms of the agreements and the related hedged obligations.
      Changes in the fair value of interest rate agreements designated as hedging
      instruments of the variability of cash flows associated with floating-rate
      debt
      obligations that meet the effectiveness criteria of SFAS No. 133 are
      reported in accumulated other comprehensive loss. For the three months ended
      June 30, 2005 and 2004, a gain of $0 and $27 million, respectively, and for
      the
      six months ended June 30, 2005 and 2004, a gain of $9 million and $29 million,
      respectively, related to derivative instruments designated as cash flow hedges,
      was recorded in accumulated other comprehensive loss. The amounts are
      subsequently reclassified into interest expense as a yield adjustment in the
      same period in which the related interest on the floating-rate debt obligations
      affects earnings (losses).





Certain
      interest rate derivative instruments are not designated as hedges as they do
      not
      meet the effectiveness criteria specified by SFAS No. 133. However,
      management believes such instruments are closely correlated with the respective
      debt, thus managing associated risk. Interest rate derivative instruments not
      designated as hedges are marked to fair value, with the impact recorded as gain
      (loss) on derivative instruments and hedging activities in the Company’s
      condensed consolidated statements of operations .
      For the
      three months ended June 30, 2005 and 2004, net
      gain
      (loss) on derivative instruments and hedging activities includes losses of
      $1
      million and gains of $60 million, respectively, and for the six months ended
      June 30, 2005 and 2004, net gain (loss) on derivative instruments and heding
      activities includes gains of $25 million and $54 million, respectively, for
      interest rate derivative instruments not designated as hedges.





13
 Table
          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


As
      of
      June 30, 2005 and December 31, 2004, the Company had outstanding $2.2
      billion and $2.7 billion and $20 million and $20 million, respectively, in
      notional amounts of interest rate swaps and collars, respectively. The notional
      amounts of interest rate instruments do not represent amounts exchanged by
      the
      parties and, thus, are not a measure of exposure to credit loss. The amounts
      exchanged are determined by reference to the notional amount and the other
      terms
      of the contracts.





**10.**
            **Revenues**





Revenues
      consist of the following for the three and six months ended June 30, 2005 and
      2004:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Video
            
            $
            861
            
            $
            846
            
            $
            1,703
            
            $
            1,695High-speed
                Internet
            
            
            226
            
            
            181
            
            
            441
            
            
            349Advertising
                sales
            
            
            76
            
            
            73
            
            
            140
            
            
            132Commercial
            
            
            69
            
            
            58
            
            
            134
            
            
            114Other
            
            
            91
            
            
            81
            
            
            176
            
            
            163$
            1,323
            
            $
            1,239
            
            $
            2,594
            
            $
            2,453





**11.**
            **Operating
                Expenses**





Operating
      expenses consist of the following for the three and six months ended June 30,
      2005 and 2004:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Programming
            
            $
            351
            
            $
            329
            
            $
            709
            
            $
            663Advertising
                sales
            
            
            25
            
            
            25
            
            
            50
            
            
            48Service
            
            
            193
            
            
            161
            
            
            369
            
            
            316$
            569
            
            $
            515
            
            $
            1,128
            
            $
            1,027





14
 Table
          of Contents
 **CCH
            II, LLC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
            in millions)**


**12.**
            **Selling,
                General and Administrative
                Expenses**





Selling,
      general and administrative expenses consist of the following for the three
      and
      six months ended June 30, 2005 and 2004:





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**General
                and administrative
            
            $
            225
            
            $
            208
            
            $
            427
            
            $
            416Marketing
            
            
            31
            
            
            36
            
            
            66
            
            
            67$
            256
            
            $
            244
            
            $
            493
            
            $
            483





Components
      of selling expense are included in general and administrative and marketing
      expense.





**13.**
            **Special
                Charges**





The
      Company has recorded special charges as a result of reducing its workforce,
      consolidating administrative offices and management realignment in 2004 and
      2005. The activity associated with this initiative is summarized in the table
      below.





**Three
                Months**
              **Ended
                June 30,**
            
            **Six
                Months**
              **Ended
                June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Beginning
                Balance
            
            $
            6
            
            $
            7
            
            $
            6
            
            $
            14Special
                Charges
            
            
            --
            
            
            2
            
            
            4
            
            
            3Payments
            
            
            (2
            )
            
            (3
            )
            
            (6
            )
            
            (11
            )Balance
                at June 30,
            
            $
            4
            
            $
            6
            
            $
            4
            
            $
            6





For
      the
      three and six months ended June 30, 2005, special charges were offset by
      approximately $2 million related to an agreed upon discount in respect of the
      portion of the settlement consideration payable under the Stipulations of
      Settlement of the consolidated Federal Class Action and the Federal Derivative
      Action allocable to plaintiff’s attorney fees and Charter’s insurance carrier as
      a result of the election to pay such fees in cash (see Note 15).





For
      the
      three and six months ended June 30, 2004, special charges also includes
      approximately $85 million, which represents the aggregate value of the Charter
      Class A common stock and warrants to purchase Charter Class A common stock
      contemplated to be issued as part of the terms set forth in memoranda of
      understanding regarding settlement of the consolidated Federal Class Action
      and
      Federal Derivative Action. For the six months ended June 30, 2004, special
      charges includes approximately $9 million of litigation costs related to the
      tentative settlement of the South Carolina national class action suit, subject
      to final documentation and court approval (see Note 15).





**14.**
            **Income
                Taxes**





The
      Company is a single member limited liability company not subject to income
      tax.  The Company holds all operations through indirect subsidiaries.
       The majority of these indirect subsidiaries are limited liability
      companies that are not subject to income tax.  However, certain of the
      Company’s indirect subsidiaries are corporations that are subject to income
      tax.




15
 Table
          of Contents


**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


As
      of June
      30 ,
      2005
      and December 31, 2004, the Company had net deferred income tax liabilities
      of
      approximately $214 million and $208 million, respectively.  The net
      deferred income tax liabilities relate to certain of the Company’s indirect
      subsidiaries, which file separate income tax returns.





During
      the three and six months ended June 30, 2005, the Company recorded $2 million
      and $8 million of income tax expense, respectively, and during the three and
      six
      months ended June 30, 2004 the Company recorded $3 million and $4 million of
      income tax expense, respectively.  The income tax expense is recognized
      through current federal and state income tax expense as well as increases to
      the
      deferred tax liabilities of certain of the Company’s indirect corporate
      subsidiaries.





Charter
      Holdco is currently under examination by the Internal Revenue Service for the
      tax years ending December 31, 2000, 2002 and 2003.  The results of the
      Company (excluding the indirect corporate subsidiaries) for these years are
      subject to this examination.  Management does not expect the results
      of
      this examination to have a material adverse effect on the Company’s financial
      condition or results of operations.




**15.**  **Contingencies**





***Securities
      Class Actions and Derivative Suits***





Fourteen
      putative federal class action lawsuits (the "Federal Class Actions")
      were
      filed against Charter and certain of its former and present officers and
      directors in various jurisdictions allegedly on behalf of all purchasers of
      Charter’s securities during the period from either November 8 or
      November 9, 1999 through July 17 or July 18, 2002. Unspecified
      damages were sought by the plaintiffs. In general, the lawsuits alleged that
      Charter utilized misleading accounting practices and failed to disclose these
      accounting practices and/or issued false and misleading financial statements
      and
      press releases concerning Charter’s operations and prospects. The Federal
      Class Actions were specifically and individually identified in public
      filings made by Charter prior to the date of this quarterly report. On
      March 12, 2003, the Panel transferred the six Federal Class Actions
      not filed in the Eastern District of Missouri to that district for coordinated
      or consolidated pretrial proceedings with the eight Federal Class Actions
      already pending there. The Court subsequently consolidated the Federal
      Class Actions into a single action (the "Consolidated Federal
      Class Action") for pretrial purposes. On August 5, 2004, the
      plaintiff’s representatives, Charter and the individual defendants who were the
      subject of the suit entered into a Memorandum of Understanding setting forth
      agreements in principle to settle the Consolidated Federal Class Action.
      These parties subsequently entered into Stipulations of Settlement dated as
      of
      January 24, 2005 (described more fully below) which incorporate the
      terms
      of the August 5, 2004 Memorandum of Understanding.




On
      September 12, 2002, a shareholders derivative suit (the "State Derivative
      Action") was filed in the Circuit Court of the City of St. Louis, State
      of
      Missouri (the "Missouri State Court"), against Charter and its then current
      directors, as well as its former auditors. The plaintiffs alleged that the
      individual defendants breached their fiduciary duties by failing to establish
      and maintain adequate internal controls and procedures. On March 12,
      2004,
      an action substantively identical to the State Derivative Action was filed
      in
      Missouri State Court against Charter and certain of its current and former
      directors, as well as its former auditors. On July 14, 2004, the Court
      consolidated this case with the State Derivative Action.





Separately,
      on February 12, 2003, a shareholders derivative suit (the "Federal
      Derivative Action"), was filed against Charter and its then current directors
      in
      the United States District Court for the Eastern District of Missouri. The
      plaintiff in that suit alleged that the individual defendants breached their
      fiduciary duties and grossly mismanaged Charter by failing to establish and
      maintain adequate internal controls and procedures.





As
      noted
      above, Charter and the individual defendants entered into a Memorandum of
      Understanding on August 5, 2004 setting forth agreements in principle
      regarding settlement of the Consolidated Federal Class Action, the State
      Derivative Action(s) and the Federal Derivative Action (the "Actions"). Charter
      and various other defendants in those actions subsequently entered into
      Stipulations of Settlement dated as of January 24, 2005, setting forth
      a
      settlement of the Actions in a manner consistent with the terms of the
      Memorandum of Understanding. The Stipulations of




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          in millions)**


Settlement,
      along with various supporting documentation, were filed with the Court on
      February 2, 2005. On May 23, 2005 the United States District
      Court for
      the Eastern District of Missouri conducted the final fairness hearing for the
      Actions, and on June 30, 2005, the Court issued its final approval of
      the
      settlements. Members of the class had 30 days from the issuance of the
      June 30 order approving the settlement to file an appeal challenging
      the
      approval. Two
      notices of appeal were filed relating to the settlement, but Charter does not
      yet know the specific issues presented by such appeals ,
      nor
      have briefing schedules been set.





As
      amended, the Stipulations of Settlement provide that, in exchange for a release
      of all claims by plaintiffs against Charter and its former and present officers
      and directors named in the Actions, Charter would pay to the plaintiffs a
      combination of cash and equity collectively valued at $144 million,
      which
      will include the fees and expenses of plaintiffs’ counsel. Of this amount,
      $64 million would be paid in cash (by Charter’s insurance carriers) and the
      $80 million balance was to be paid (subject to Charter’s right to
      substitute cash therefor described below) in shares of Charter Class A
      common stock having an aggregate value of $40 million and ten-year warrants
      to purchase shares of Charter Class A common stock having an aggregate
      warrant value of $40 million, with such values in each case being
      determined pursuant to formulas set forth in the Stipulations of Settlement.
      However, Charter had the right, in its sole discretion, to substitute cash
      for
      some or all of the aforementioned securities on a dollar for dollar basis.
      Pursuant to that right, Charter elected to fund the $80 million obligation
      with 13.4 million shares of Charter Class A common stock (having
      an
      aggregate value of approximately $15 million pursuant to the formula
      set
      forth in the Stipulations of Settlement) with the remaining balance (less an
      agreed upon $2 million discount in respect of that portion allocable
      to
      plaintiffs’ attorneys’ fees) to be paid in cash. In addition, Charter had agreed
      to issue additional shares of its Class A common stock to its insurance
      carrier having an aggregate value of $5 million; however, by agreement
      with
      its carrier Charter has paid $4.5 million in cash in lieu of issuing
      such
      shares. Charter delivered the settlement consideration to the claims
      administrator on July 8, 2005, and it will be held in escrow pending
      any
      appeals of the approval. On July 14, 2005, the Circuit Court for the City of
      St.
      Louis dismissed with prejudice the State Derivative Actions.





As
      part
      of the settlements, Charter has committed to a variety of corporate governance
      changes, internal practices and public disclosures, some of which have already
      been undertaken and none of which are inconsistent with measures Charter is
      taking in connection with the recent conclusion of the SEC
      investigation.





***Government
      Investigations***





In
      August
      2002, Charter became aware of a grand jury investigation being conducted by
      the
      U.S. Attorney’s Office for the Eastern District of Missouri into certain of
      its accounting and reporting practices, focusing on how Charter reported
      customer numbers, and its reporting of amounts received from digital set-top
      terminal suppliers for advertising. The U.S. Attorney’s Office publicly
      stated that Charter was not a target of the investigation. Charter was also
      advised by the U.S. Attorney’s Office that no current officer or member of
      its board of directors was a target of the investigation. On July 24,
      2003,
      a federal grand jury charged four former officers of Charter with conspiracy
      and
      mail and wire fraud, alleging improper accounting and reporting practices
      focusing on revenue from digital set-top terminal suppliers and inflated
      customer account numbers. Each of the indicted former officers pled guilty
      to
      single conspiracy counts related to the original mail and wire fraud charges
      and
      were sentenced April 22, 2005. Charter has advised the Company that
      it has
      fully cooperated with the investigation, and following the sentencings, the
      U.S. Attorney’s Office for the Eastern District of Missouri announced that
      its investigation was concluded and that no further indictments would
      issue.





***Indemnification***





Charter
      was generally required to indemnify, under certain conditions, each of the
      named
      individual defendants in connection with the matters described above pursuant
      to
      the terms of its bylaws and (where applicable) such individual defendants’
      employment agreements. In accordance with these documents, in connection with
      the grand jury investigation, a now-settled SEC investigation and the
      above-described lawsuits, some of Charter’s current and former directors and
      current and former officers have been advanced certain costs and expenses
      incurred in connection with their defense. On February 22, 2005, Charter
      filed suit against four of its former officers who were indicted in the




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 **(UNAUDITED)**
 **(dollars
          in millions)**


course
      of
      the grand jury investigation. These suits seek to recover the legal fees and
      other related expenses advanced to these individuals. One of these former
      officers has counterclaimed against Charter alleging, among other things, that
      Charter owes him additional indemnification for legal fees that Charter did
      not
      pay and another of these former officers has counterclaimed against Charter
      for
      accrued sick leave.





***Other
      Litigation***





In
      addition to the matters set forth above, Charter is also party to other lawsuits
      and claims that arose in the ordinary course of conducting its business. In
      the
      opinion of management, after taking into account recorded liabilities, the
      outcome of these other lawsuits and claims are not expected to have a material
      adverse effect on the Company’s consolidated financial condition, results of
      operations or its liquidity.





**16.**
            **Stock
                Compensation Plans**





Prior
      to
      January 1, 2003, the Company accounted for stock-based compensation in
      accordance with Accounting Principles Board ("APB") Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations, as permitted by SFAS No. 123, *Accounting
      for Stock-Based Compensation* .
      On
      January 1, 2003, the Company adopted the fair value measurement provisions
      of SFAS No. 123 using the prospective method, under which the Company
      recognizes compensation expense of a stock-based award to an employee over
      the
      vesting period based on the fair value of the award on the grant date consistent
      with the method described in Financial Accounting Standards Board Interpretation
      No. 28, *Accounting
      for Stock Appreciation Rights and Other Variable Stock Option or Award
      Plans* .
      Adoption of these provisions resulted in utilizing a preferable accounting
      method as the condensed consolidated financial statements will present the
      estimated fair value of stock-based compensation in expense consistently with
      other forms of compensation and other expense associated with goods and services
      received for equity instruments. In accordance with SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure,* the
      fair
      value method is being applied only to awards granted or modified after
      January 1, 2003, whereas awards granted prior to such date will continue
      to
      be accounted for under APB No. 25, unless they are modified or settled
      in
      cash. The ongoing effect on consolidated results of operations or financial
      condition will depend on future stock-based compensation awards granted by
      Charter.





SFAS
      No. 123 requires pro forma disclosure of the impact on earnings as if
      the
      compensation expense for these plans had been determined using the fair value
      method. The following table presents the Company’s net loss as reported and the
      pro forma amounts that would have been reported using the fair value method
      under SFAS No. 123 for the periods presented:




**Three
                Months Ended**
              **June
                30,**
            
            **Six
                Months Ended**
              **June
                30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Net
                loss
            
            $
            (87
            )
            $
            (130
            )
            $
            (220
            )
            $
            (130
            )Add
                back stock-based compensation expense related to stock
              options
                included in reported net loss
            
            
            4
            
            
            12
            
            
            8
            
            
            26Less
                employee stock-based compensation expense determined under fair
              value
                based method for all employee stock option awards
            
            
            (4
            )
            
            (10
            )
            
            (8
            )
            
            (31
            )Effects
                ofunvested
                options instock
                option exchange
            
            
            --
            
            
            --
            
            
            --
            
            
            48Pro
                forma
            
            $
            (87
            )
            $
            (128
            )
            $
            (220
            )
            $
            (87
            )





In
      January 2004, Charter began an option exchange program in which the Company
      offered its employees the right to exchange all stock options (vested and
      unvested) under the 1999 Charter Communications Option Plan and 2001 Stock
      Incentive Plan that had an exercise price over $10 per share for shares of
      restricted Charter Class A common stock or, in some instances, cash. Based
      on
      a sliding exchange ratio, which varied depending on the exercise price of an
      employee’s outstanding options, if an employee would have received more than 400
      shares of restricted stock in exchange for tendered options, Charter issued
      to
      that employee shares of restricted stock in the exchange. If, based
      on




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 **(dollars
          in millions)**


the
      exchange ratios, an employee would have received 400 or fewer shares of
      restricted stock in exchange for tendered options, Charter instead paid the
      employee cash in an amount equal to the number of shares the employee would
      have
      received multiplied by $5.00.  The
      offer
      applied to options (vested and unvested) to purchase a total of 22,929,573
      shares of Charter Class A common stock, or approximately 48% of Charter’s
      47,882,365 total options (vested and unvested) issued and outstanding as of
      December 31, 2003. Participation by employees was voluntary. Those members
      of
      Charter’s board of directors who were not also employees of the Company were not
      eligible to participate in the exchange offer.





In
      the
      closing of the exchange offer on February 20, 2004, Charter accepted for
      cancellation eligible options to purchase approximately 18,137,664 shares of
      Charter Class A common stock. In exchange, Charter granted 1,966,686 shares
      of
      restricted stock, including 460,777 performance shares to eligible employees
      of
      the rank of senior vice president and above, and paid a total cash amount of
      approximately $4 million (which amount includes applicable withholding taxes)
      to
      those employees who received cash rather than shares of restricted stock. The
      restricted stock was granted on February 25, 2004. Employees tendered
      approximately 79% of the options exchangeable under the program.





The
      cost
      to the Company of the stock option exchange program was approximately $10
      million, with a 2004 cash compensation expense of approximately $4 million
      and a
      non-cash compensation expense of approximately $6 million to be expensed ratably
      over the three-year vesting period of the restricted stock issued in the
      exchange.





In
      January 2004, the Compensation Committee of the board of directors of Charter
      approved Charter’s Long-Term Incentive Program ("LTIP"), which is a program
      administered under the 2001 Stock Incentive Plan. Under the LTIP, employees
      of
      Charter and its subsidiaries whose pay classifications exceed ****** a
      certain
      level are eligible to receive stock options, and more senior level employees
      are
      eligible to receive stock options and performance shares. The stock options
      vest
      25% on each of the first four anniversaries of the date of grant. The
      performance units vest on the third anniversary of the grant date and shares
      of
      Charter Class A common stock are issued, conditional upon Charter’s performance
      against financial performance targets established by Charter’s management and
      approved by its board of directors. Charter granted 6.9 million performance
      shares in January 2004 under this program and the Company recognized expense
      of
      $3 million and $6 million during the three and six months ended June 30, 2004,
      respectively. However, in the fourth quarter of 2004, the Company reversed
      the
      $8 million of expense recorded in the first three quarters of 2004 based on
      the
      Company’s assessment of the probability of achieving the financial performance
      measures established by Charter and required to be met for the performance
      shares to vest. In March and April 2005, Charter granted 2.8 million performance
      shares under the LTIP. The impact of such grants were de minimis to the
      Company’s results of operations for the three and six months ended June 30,
      2005.





**17.**
            **Related
                Party Transactions**





The
      following sets forth certain transactions in which the Company and the
      directors, executive officers and affiliates of the Company are involved. Unless
      otherwise disclosed, management believes that each of the transactions described
      below was on terms no less favorable to the Company than could have been
      obtained from independent third parties.





***CC
      VIII***





As
      part
      of the acquisition of the cable systems owned by Bresnan Communications Company
      Limited Partnership in February 2000, CC VIII, CCH II’s indirect limited
      liability company subsidiary, issued, after adjustments, 24,273,943 Class A
      preferred membership units (collectively, the "CC VIII interest") with
      a
      value and an initial capital account of approximately $630 million to certain
      sellers affiliated with AT&T Broadband, subsequently owned by Comcast
      Corporation (the "Comcast sellers"). While held by the Comcast sellers,
      the
      CC VIII interest was entitled to a 2% priority return on its initial
      capital account and such priority return was entitled to preferential
      distributions from available cash and upon liquidation of CC VIII. While held
      by
      the Comcast sellers, the CC VIII interest generally did not share in
      the
      profits and losses of CC VIII. Mr. Allen granted the Comcast
      sellers
      the right to sell to him the CC VIII interest for approximately
      $630 million plus 4.5% interest annually from February 2000 (the "Comcast
      put




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right").
      In April 2002, the Comcast sellers exercised the Comcast put right in full,
      and
      this transaction was consummated on June 6, 2003. Accordingly,
      Mr. Allen has become the holder of the CC VIII interest, indirectly
      through an affiliate. Consequently, subject to the matters referenced in the
      next paragraph, Mr. Allen generally thereafter will be allocated his
      pro
      rata share (based on number of membership interests outstanding) of profits
      or
      losses of CC VIII. In
      the
      event of a liquidation of CC VIII, Mr. Allen would be entitled to a priority
      distribution with respect to the 2% priority return (which will continue to
      accrete). Any remaining distributions in liquidation would be distributed to
      CC
      V Holdings, LLC and Mr. Allen in proportion to CC V Holdings, LLC's capital
      account and Mr. Allen's capital account (which will equal the initial capital
      account of the Comcast sellers of approximately $630 million, increased or
      decreased by Mr. Allen's pro rata share of CC VIII’s profits or losses (as
      computed for capital account purposes) after June 6, 2003).  The
      limited liability company agreement of CC VIII does not provide for
      a
      mandatory redemption of the CC VIII interest.





An
      issue
      has arisen as to whether the documentation for the Bresnan transaction was
      correct and complete with regard to the ultimate ownership of the CC VIII
      interest following consummation of the Comcast put right. Specifically, under
      the terms of the Bresnan transaction documents that were entered into in June
      1999, the Comcast sellers originally would have received, after adjustments,
      24,273,943 Charter Holdco membership units, but due to an FCC regulatory issue
      raised by the Comcast sellers shortly before closing, the Bresnan transaction
      was modified to provide that the Comcast sellers instead would receive the
      preferred equity interests in CC VIII represented by the CC VIII interest.
      As
      part of the last-minute changes to the Bresnan transaction documents, a draft
      amended version of the Charter Holdco limited liability company agreement was
      prepared, and contract provisions were drafted for that agreement that would
      have required an automatic exchange of the CC VIII interest for 24,273,943
      Charter Holdco membership units if the Comcast sellers exercised the Comcast
      put
      right and sold the CC VIII interest to Mr. Allen or his affiliates. However,
      the
      provisions that would have required this automatic exchange did not appear
      in
      the final version of the Charter Holdco limited liability company agreement
      that
      was delivered and executed at the closing of the Bresnan transaction. The law
      firm that prepared the documents for the Bresnan transaction brought this matter
      to the attention of Charter and representatives of Mr. Allen in 2002.





Thereafter,
      the board of directors of Charter formed a Special Committee (currently
      comprised of Messrs. Merritt, Tory and Wangberg) to investigate the
      matter
      and take any other appropriate action on behalf of Charter with respect to
      this
      matter. After conducting an investigation of the relevant facts and
      circumstances, the Special Committee determined that a "scrivener’s error" had
      occurred in February 2000 in connection with the preparation of the last-minute
      revisions to the Bresnan transaction documents and that, as a result, Charter
      should seek the reformation of the Charter Holdco limited liability company
      agreement, or alternative relief, in order to restore and ensure the obligation
      that the CC VIII interest be automatically exchanged for Charter Holdco units.
      The Special Committee further determined that, as part of such contract
      reformation or alternative relief, Mr. Allen should be required to
      contribute the CC VIII interest to Charter Holdco in exchange for
      24,273,943 Charter Holdco membership units. The Special Committee also
      recommended to the board of directors of Charter that, to the extent the
      contract reformation is achieved, the board of directors should consider whether
      the CC VIII interest should ultimately be held by Charter Holdco or
      Charter
      Holdings or another entity owned directly or indirectly by them.





Mr. Allen
      disagrees with the Special Committee’s determinations described above and has so
      notified the Special Committee. Mr. Allen contends that the transaction is
      accurately reflected in the transaction documentation and contemporaneous and
      subsequent company public disclosures.





The
      parties engaged in a process of non-binding mediation to seek to resolve this
      matter, without success. The Special Committee is evaluating what further
      actions or processes it may undertake to resolve this dispute. To accommodate
      further deliberation, each party has agreed to refrain from initiating legal
      proceedings over this matter until it has given at least ten days’ prior notice
      to the other. In addition, the Special Committee and Mr. Allen have determined
      to utilize the Delaware Court of Chancery’s program for mediation of complex
      business disputes in an effort to resolve the CC VIII interest dispute. If
      the
      Special Committee and Mr. Allen are unable to reach a resolution through
      that mediation process or to agree on an alternative dispute resolution process,
      the Special Committee intends to seek resolution of this dispute through
      judicial proceedings in an action that would be commenced, after appropriate
      notice, in the Delaware Court of Chancery against Mr. Allen and his
      affiliates seeking contract reformation, declaratory relief as to




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          in millions)**


the
      respective rights of the parties regarding this dispute and alternative forms
      of
      legal and equitable relief. The ultimate resolution and financial impact of
      the
      dispute are not determinable at this time.





***TechTV,
      Inc.***





TechTV,
      Inc. ( " TechTV " )
      operated a cable television network that offered programming mostly related
      to
      technology. Pursuant to an affiliation agreement that originated in 1998 and
      that terminates in 2008, TechTV has provided the Company with programming for
      distribution via Charter’s cable systems. The affiliation agreement provides,
      among other things, that TechTV must offer Charter certain terms and conditions
      that are no less favorable in the affiliation agreement than are given to any
      other distributor that serves the same number of or fewer TechTV viewing
      customers. Additionally, pursuant to the affiliation agreement, the Company
      was
      entitled to incentive payments for channel launches through December 31,
      2003.





In
      March
      2004, Charter Holdco entered into agreements with Vulcan Programming and TechTV,
      which provide for (i) Charter Holdco and TechTV to amend the affiliation
      agreement which, among other things, revises the description of the TechTV
      network content, provides for Charter Holdco to waive certain claims against
      TechTV relating to alleged breaches of the affiliation agreement and provides
      for TechTV to make payment of outstanding launch receivables due to Charter
      Holdco under the affiliation agreement, (ii) Vulcan Programming to pay
      approximately $10 million and purchase over a 24-month period, at fair market
      rates, $2 million of advertising time across various cable networks on Charter
      cable systems in consideration of the agreements, obligations, releases and
      waivers under the agreements and in settlement of the aforementioned claims
      and
      (iii) TechTV to be a provider of content relating to technology and video gaming
      for Charter’s interactive television platforms through December 31, 2006
      (exclusive for the first year). For each of the three and six months ended
      June
      30, 2005 and 2004, the Company recognized approximately $0.3 million and $0.6
      million, respectively, of the Vulcan Programming payment as an offset to
      programming expense. For the three and six months ended June 30, 2005, the
      Company paid approximately $0.5 million and $1 million, respectively, and for
      the three and six months ended June 30, 2004, the Company paid approximately
      $0.4 million and $0.6 million, respectively, under the affiliation
      agreement.





The
      Company believes that Vulcan Programming, which is 100% owned by Mr. Allen,
      owned an approximate 98% equity interest in TechTV at the time Vulcan
      Programming sold TechTV to an unrelated third party in May 2004. Until September
      2003, Mr. Savoy, a former Charter director, was the president and director
      of Vulcan Programming and was a director of TechTV. Mr. Wangberg, one
      of
      Charter’s directors, was the chairman, chief executive officer and a director of
      TechTV. Mr. Wangberg resigned as the chief executive officer of TechTV in July
      2002. He remained a director of TechTV along with Mr. Allen until Vulcan
      Programming sold TechTV.





***Digeo,
      Inc.***





In
      March
      2001, a subsidiary of CCH II, Charter Communications Ventures, LLC ( " Charter
      Ventures " ),
      and
      Vulcan Ventures Incorporated formed DBroadband Holdings, LLC for the sole
      purpose of purchasing equity interests in Digeo, Inc. ( " Digeo " ),
      an
      entity controlled by Paul Allen. In connection with the execution of the
      broadband carriage agreement, DBroadband Holdings, LLC purchased an equity
      interest in Digeo funded by contributions from Vulcan Ventures Incorporated.
      The
      equity interest is subject to a priority return of capital to Vulcan Ventures
      up
      to the amount contributed by Vulcan Ventures on Charter Ventures’ behalf. After
      Vulcan Ventures recovers its amount contributed and any cumulative loss
      allocations, Charter Ventures has a 100% profit interest in DBroadband Holdings,
      LLC. Charter Ventures is not required to make any capital contributions,
      including capital calls, to Digeo. DBroadband Holdings, LLC is therefore not
      included in the Company’s consolidated financial statements. Pursuant to an
      amended version of this arrangement, in 2003, Vulcan Ventures contributed a
      total of $29 million to Digeo, $7 million of which was contributed
      on
      Charter Ventures’ behalf, subject to Vulcan Ventures’ aforementioned priority
      return. Since the formation of DBroadband Holdings, LLC, Vulcan Ventures has
      contributed approximately $56 million on Charter Ventures’ behalf.




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 **NOTES
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 **(UNAUDITED)**
 **(dollars
          in millions)**




On
      March 2, 2001, Charter Ventures entered into a broadband carriage agreement
      with Digeo Interactive, LLC ("Digeo Interactive"), a wholly owned subsidiary
      of
      Digeo. The carriage agreement provided that Digeo Interactive would provide
      to
      Charter a "portal" product, which would function as the television-based
      Internet portal (the initial point of entry to the Internet) for Charter’s
      customers who received Internet access from Charter. The agreement term was
      for
      25 years and Charter agreed to use the Digeo portal exclusively for
      six
      years. Before the portal product was delivered to Charter, Digeo terminated
      development of the portal product.





On
      September 27, 2001, Charter and Digeo Interactive amended the broadband
      carriage agreement. According to the amendment, Digeo Interactive would provide
      to Charter the content for enhanced "Wink" interactive television services,
      known as Charter Interactive Channels ("i-channels"). In order to provide the
      i-channels, Digeo Interactive sublicensed certain Wink technologies to Charter.
      Charter is entitled to share in the revenues generated by the i-channels.
      Currently, the Company’s digital video customers who receive i-channels receive
      the service at no additional charge.





On
      September 28, 2002, Charter entered into a second amendment to its
      broadband carriage agreement with Digeo Interactive. This amendment superseded
      the amendment of September 27, 2001. It provided for the development
      by
      Digeo Interactive of future features to be included in the Basic i-TV service
      to
      be provided by Digeo and for Digeo’s development of an interactive " toolkit " to
      enable Charter to develop interactive local content. Furthermore, Charter could
      request that Digeo Interactive manage local content for a fee. The amendment
      provided for Charter to pay for development of the Basic i-TV service as well
      as
      license fees for customers who would receive the service, and for Charter and
      Digeo to split certain revenues earned from the service. The Company paid Digeo
      Interactive approximately $1 million and $1 million for the three and six months
      ended June 30, 2005, respectively, and $1 million and $1 million for the three
      and six months ended June 30, 2004, respectively, for customized development
      of
      the i-channels and the local content tool kit. This amendment expired pursuant
      to its terms on December 31, 2003. Digeo Interactive is continuing to provide
      the Basic i-TV service on a month-to-month basis.





On
      June
      30, 2003, Charter Holdco entered into an agreement with Motorola, Inc. for
      the
      purchase of 100,000 digital video recorder ("DVR") units. The software for
      these
      DVR units is being supplied by Digeo Interactive, LLC under a license agreement
      entered into in April 2004. Under the license agreement Digeo Interactive
      granted to Charter Holdco the right to use Digeo’s proprietary software for the
      number of DVR units that Charter deployed from a maximum of 10 headends through
      year-end 2004. This maximum number of headends was increased from 10 to 15
      pursuant to a letter agreement executed on June 11, 2004 and the date for
      entering into license agreements for units deployed was extended to June 30,
      2005. The number of headends was increased from 15 to 20 pursuant to a letter
      agreement dated August 4, 2004, from 20 to 30 pursuant to a letter agreement
      dated September 28, 2004 and from 30 to 50 headends by a letter agreement in
      February 2005. The license granted for each unit deployed under the agreement
      is
      valid for five years. In addition, Charter will pay certain other fees including
      a per-headend license fee and maintenance fees. Maximum license and maintenance
      fees during the term of the agreement are expected to be approximately $7
      million. The agreement provides that Charter is entitled to receive contract
      terms, considered on the whole, and license fees, considered apart from other
      contract terms, no less favorable than those accorded to any other Digeo
      customer. Charter paid approximately $0.1 million and $0.2 million in license
      and maintenance fees for the three and six months ended June 30, 2005,
      respectively.





In
      April
      2004, the Company launched DVR service using units containing the Digeo software
      in Charter’s Rochester, Minnesota market using a broadband media center that is
      an integrated set-top terminal with a cable converter, DVR hard drive and
      connectivity to other consumer electronics devices (such as stereos, MP3
      players, and digital cameras).





In
      May
      2004, Charter Holdco entered into a binding term sheet with Digeo Interactive
      for the development, testing and purchase of 70,000 Digeo PowerKey DVR units.
      The term sheet provided that the parties would proceed in good faith to
      negotiate, prior to year-end 2004, definitive agreements for the development,
      testing and purchase of the DVR units and that the parties would enter into
      a
      license agreement for Digeo's proprietary software on terms substantially
      similar to the terms of the license agreement described above. In November
      2004,
      Charter Holdco and Digeo Interactive executed the license agreement and in
      December 2004, the parties executed the purchase agreement, each on terms
      substantially similar to the binding term sheet. Product development and testing
      has been completed. Total purchase




22
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**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


price
      and
      license and maintenance fees during the term of the definitive agreements are
      expected to be approximately $41 million. The definitive agreements are
      terminable at no penalty to Charter in certain circumstances. Charter
      paid approximately $1 million and $2 million in capital purchases under this
      agreement for the three and six months ended June 30, 2005,
      respectively.





In
      late
      2003, Microsoft filed suit against Digeo for $9 million in a breach
      of
      contract action, involving an agreement that Digeo and Microsoft had entered
      into in 2001. Digeo informed us that it believed it had an indemnification
      claim
      against us for half that amount. Digeo settled with Microsoft agreeing to make
      a
      cash payment and to purchase certain amounts of Microsoft software products
      and
      consulting services through 2008. In consideration of Digeo agreeing to release
      us from its potential claim against us, after consultation with outside counsel
      we agreed, in June 2005, to purchase a total of $2.3 million in Microsoft
      consulting services through 2008, a portion of which amounts Digeo has informed
      us will count against Digeo’s purchase obligations with Microsoft.





The
      Company believes that Vulcan Ventures, an entity controlled by Mr. Allen,
      owns an approximate 60% equity interest in Digeo, Inc., on a fully-converted
      non-diluted basis. Mr. Allen, Lance Conn and Jo Allen Patton, directors of
      Charter, are directors of Digeo, and Mr. Vogel was a director of Digeo in 2004.
      During 2004 and 2005, Mr. Vogel held options to purchase 10,000 shares
      of
      Digeo common stock.





***Oxygen
      Media LLC***





Oxygen
      Media LLC ("Oxygen") provides programming content aimed at the female audience
      for distribution over cable systems and satellite. On July 22, 2002,
      Charter Holdco entered into a carriage agreement with Oxygen, whereby the
      Company agreed to carry programming content from Oxygen. Under the carriage
      agreement, the Company currently makes Oxygen programming available to
      approximately 5 million of its video customers. The term of the carriage
      agreement was retroactive to February 1, 2000, the date of launch of
      Oxygen
      programming by the Company, and runs for a period of five years from that date.
      For the three and six months ended June 30, 2005, the Company paid Oxygen
      approximately $2 million and $5 million, respectively, and for the three and
      six
      months ended June 30, 2004, the Company paid Oxygen approximately $3 million
      and
      $7 million, respectively, for programming content. In addition, Oxygen pays
      the
      Company marketing support fees for customers launched after the first year
      of
      the term of the carriage agreement up to a total of $4 million. The
      Company
      recorded approximately $0.1 million related to these launch incentives as a
      reduction of programming expense for the six months ended June 30, 2005, and
      $0.4 million and $0.7 million for the three and six months ended June
      30,
      2004, respectively.





Concurrently
      with the execution of the carriage agreement, Charter Holdco entered into an
      equity issuance agreement pursuant to which Oxygen’s parent company, Oxygen
      Media Corporation ( " Oxygen
      Media " ),
      granted a subsidiary of Charter Holdco a warrant to purchase 2.4 million
      shares of Oxygen Media common stock for an exercise price of $22.00 per share.
      In February 2005, this warrant expired unexercised. Charter Holdco was also
      to
      receive unregistered shares of Oxygen Media common stock with a guaranteed
      fair
      market value on the date of issuance of $34 million, on or prior to
      February 2, 2005, with the exact date to be determined by Oxygen Media,
      but
      this commitment was later revised as discussed below.





The
      Company recognized the guaranteed value of the investment over the life of
      the
      carriage agreement as a reduction of programming expense. For the six months
      ended June 30, 2005, the Company recorded approximately $2 million, as a
      reduction of programming expense and for the three and six months ended June
      30,
      2004, the Company recorded approximately $3 million and $7 million,
      respectively. The carrying value of the Company’s investment in Oxygen was
      approximately $33 million and $32 million as of June 30, 2005 and
      December 31, 2004, respectively.





In
      August
      2004, Charter Holdco and Oxygen entered into agreements that amended and renewed
      the carriage agreement. The amendment to the carriage agreement (a) revises
      the
      number of the Company’s customers to which Oxygen programming must be carried
      and for which the Company must pay, (b) releases Charter Holdco from any claims
      related to the failure to achieve distribution benchmarks under the carriage
      agreement, (c) requires Oxygen to make payment on outstanding receivables for
      marketing support fees due to the Company under the carriage agreement; and
      (d)
      requires that Oxygen provide its programming content to the Company on economic
      terms no less




23
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**CCH
          II, LLC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**
 **(dollars
          in millions)**


favorable
      than Oxygen provides to any other cable or satellite operator having fewer
      subscribers than the Company. The renewal of the carriage agreement (a) extends
      the period that the Company will carry Oxygen programming to the Company’s
      customers through January 31, 2008, and (b) requires license fees to be paid
      based on customers receiving Oxygen programming, rather than for specific
      customer benchmarks.





In
      August
      2004, Charter Holdco and Oxygen also amended the equity issuance agreement
      to
      provide for the issuance of 1 million shares of Oxygen Preferred Stock with
      a
      liquidation preference of $33.10 per share plus accrued dividends to Charter
      Holdco on February 1, 2005 in place of the $34 million of unregistered shares
      of
      Oxygen Media common stock. Oxygen Media delivered these shares in March 2005.
      The preferred stock is convertible into common stock after December 31, 2007
      at
      a conversion ratio per share of preferred stock, the numerator of which is
      the
      liquidation preference and the denominator of which is the fair market value
      per
      share of Oxygen Media common stock on the conversion date.





As
      of
      June 30, 2005, through Vulcan Programming, Mr. Allen owned an approximate 31%
      interest in Oxygen assuming no exercises of outstanding warrants or conversion
      or exchange of convertible or exchangeable securities. Ms. Jo Allen Patton
      is a
      director and the President of Vulcan Programming. Mr. Lance Conn is a Vice
      President of Vulcan Programming. Marc Nathanson has an indirect beneficial
      interest of less than 1% in Oxygen.





**18.**
            **Recently
                Issued Accounting
                Standards**





In
      November 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
      No.
      153, *Exchanges
      of Non-monetary Assets - An Amendment of APB No. 29* .
      This
      statement eliminates the exception to fair value for exchanges of similar
      productive assets and replaces it with a general exception for exchange
      transactions that do not have commercial substance - that is, transactions
      that
      are not expected to result in significant changes in the cash flows of the
      reporting entity. The Company adopted this pronouncement effective April 1,
      2005. The exchange transaction discussed in Note 3 was accounted for under
      this
      standard.





In
      December 2004, the Financial Accounting Standards Board issued the revised
      SFAS
      No. 123, *Share-Based
      Payment* ,
      which
      addresses the accounting for share-based payment transactions in which a company
      receives employee services in exchange for (a) equity instruments of that
      company or (b) liabilities that are based on the fair value of the company’s
      equity instruments or that may be settled by the issuance of such equity
      instruments. This statement will be effective for the Company beginning January
      1, 2006. Because the Company adopted the fair value recognition provisions
      of
      SFAS No. 123 on January 1, 2003, the Company does not expect this revised
      standard to have a material impact on its financial statements.





The
      Company does not believe that any other recently issued, but not yet effective
      accounting pronouncements, if adopted, would have a material effect on the
      Company’s accompanying financial statements.





24
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  **Item
        2.** **Management's
        Discussion and Analysis of Financial Condition and Results of
        Operations.**





**General**





CCH
      II,
      LLC ("CCH II") is a holding company whose principal assets as of June
      30,
      2005 are
      equity interests in its operating subsidiaries. CCH II is a subsidiary of CCH
      I,
      LLC ("CCH I"). CCH I is a subsidiary of Charter Communications Holdings, LLC
      ("Charter Holdings"), which is a subsidiary of Charter Communications Holding
      Company, LLC ("Charter Holdco"), which is a subsidiary of Charter
      Communications, Inc. ("Charter"). "We," "us" and "our" refer to CCH II and
      its
      subsidiaries. Our "parent companies" are CCH I, Charter Holdings, Charter Holdco
      and Charter. We
      are a
      broadband communications company operating in the United States. We offer our
      customers traditional cable video programming (analog and digital video) as
      well
      as high-speed Internet services and in some areas advanced broadband services
      such as high definition television, video on demand, telephone and interactive
      television. We sell our cable video programming, high-speed Internet and
      advanced broadband services on a subscription basis.





The
      following table summarizes our customer statistics for analog and digital video,
      residential high-speed Internet and residential telephone as of June
      30,
      2005 and 2004 :





**Approximate
                as of****June
                30,**
            
            **June
                30,****2005
                (a)**
            
            **2004
                (a)****Cable
                Video Services:****Analog
                Video:**Residential
                (non-bulk) analog video customers (b)
            
            
            5,683,400
            
            
            5,892,600Multi-dwelling
                (bulk) and commercial unit customers (c)
            
            
            259,700
            
            
            240,600Total
                analog video customers (b)(c)
            
            
            5,943,100
            
            
            6,133,200**Digital
                Video:**Digital
                video customers (d)
            
            
            2,685,600
            
            
            2,650,200**Non-Video
                Cable Services:**Residential
                high-speed Internet customers (e)
            
            
            2,022,200
            
            
            1,711,400Telephone
                customers (f)
            
            
            67,800
            
            
            31,200





(a)
            "Customers"
                include all persons our corporate billing records show as receiving
                service (regardless of their payment status), except for complimentary
                accounts (such as our employees). At June 30, 2005 and 2004, "customers"
                include approximately 45,100 and 58,700 persons whose accounts were
                over
                60 days past due in payment, approximately 8,200 and 6,300 persons
                whose
                accounts were over 90 days past due in payment, and approximately
                4,500
                and 2,000 of which were over 120 days past due in payment, respectively.





(b)
            "Residential
                (non-bulk) analog video customers" include all customers who receive
                video
                services, except for complimentary accounts (such as our employees).





(c)
            Included
                within "video customers" are those in commercial and multi-dwelling
                structures, which are calculated on an equivalent bulk unit ("EBU")
                basis.
                EBU is calculated for a system by dividing the bulk price charged
                to
                accounts in an area by the most prevalent price charged to non-bulk
                residential customers in that market for the comparable tier of service.
                The EBU method of estimating analog video customers is consistent
                with the
                methodology used in determining costs paid to programmers and has
                been
                consistently applied year over year. As we increase our effective
                analog
                prices to residential customers without a corresponding increase
                in the
                prices charged to commercial service or multi-dwelling customers,
                our EBU
                count will decline even if there is no real loss in commercial service
                or
                multi-dwelling customers.





(d)
            "Digital
                video customers" include all households that have one or more digital
                set-top terminals. Included in "digital video customers" on June
                30, 2005
                and 2004 are approximately 9,700 and 11,400 customers, respectively,
                that
                receive digital video service directly through satellite transmission.





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(e)
            "High-speed
                Internet customers" represent those customers who subscribe to our
                high-speed Internet service. At June 30, 2005 and 2004, approximately
                1,787,600 and 1,543,000 of these high-speed Internet customers,
                respectively, receive video services from us and are included within
                our
                video statistics above.





(f)
            "Telephone
                customers" include all households who subscribe to our telephone
                service.





**Overview
      of Operations**




We
      have a
      history of net losses. Further, we expect to continue to report net losses
      for
      the foreseeable future. Our net losses are principally attributable to
      insufficient revenue to cover the combination
      of operating costs and interest
      costs we incur, depreciation expenses that we incur resulting from the capital
      investments we have made and continue to make in our business, and amortization
      and impairment of our franchise intangibles. We expect that these expenses
      (other than amortization and impairment of franchises) will remain significant,
      and we therefore expect to continue to report net losses for the foreseeable
      future. Effective January 1, 2005, we ceased recognizing minority interest
      in
      earnings or losses of CC VIII, LLC for financial reporting purposes until the
      resolution of the dispute between Charter and Mr. Allen regarding the preferred
      membership units in CC VIII, LLC is determinable or other events
      occur.




For
      the
      three months ended June 30, 2005 and 2004, our income from operations, which
      includes depreciation and amortization expense and asset impairment charges
      but
      excludes interest expense, was $110 million and $15 million, respectively,
      and
      for the six months ended June 30, 2005 and 2004, our income from operations
      was
      $161 million and $190 million, respectively. We had operating margins of 8%
      and
      1% for the three months ended June 30, 2005 and 2004, respectively, and 6%
      and
      8% for the six months ended June 30, 2005 and 2004, respectively. The increase
      in income from operations and operating margins from the three months ended
      June
      30, 2004 compared to 2005 was principally due to approximately $85 million
      recorded in special charges for the three months ended June 30, 2004 as part
      of
      the terms set forth in memoranda of understanding regarding settlement of the
      consolidated Federal Class Action and Federal Derivative Action which did not
      recur in 2005. See
      "—
      Legal Proceedings." The
      decrease in income from operations and operating margins from the six months
      ended June 30, 2004 compared to 2005 was principally due to the one-time gain
      as
      a result of the sale of certain cable systems in Florida, Pennsylvania,
      Maryland, Delaware and West Virginia to Atlantic Broadband Finance, LLC of
      approximately $106 million, recognized in the six months ended June 30, 2004,
      offset by $85 million recorded in special charges discussed above.




Historically,
      our ability to fund operations and investing activities has depended on our
      continued access to credit under our credit facilities. We expect we will
      continue to borrow under our credit facilities from time to time to fund cash
      needs. The occurrence of an event of default under our credit facilities could
      result in borrowings from these credit facilities being unavailable to us and
      could, in the event of a payment default or acceleration, also trigger events
      of
      default under the indentures governing our outstanding notes and would have
      a
      material adverse effect on us. Approximately $15 million of our debt matures
      during the remainder of 2005, which we expect to fund through borrowings under
      our revolving credit facility. See "— Liquidity and Capital
      Resources."





**Critical
      Accounting Policies and Estimates**





For
      a
      discussion of our critical accounting policies and the means by which we develop
      estimates therefor, see "Item 7. Management’s Discussion and Analysis of
      Financial Condition and Results of Operations" in our 2004 Annual Report on
      Form
      10-K.




26
 Table
          of Contents


RESULTS OF
      OPERATIONS




***Six
      Months Ended June 30, 2005 Compared to Six Months Ended June 30,
      2004***





The
      following table sets forth the percentages of revenues that items in the
      accompanying consolidated statements of operations constituted for the periods
      presented (dollars in millions):





**Six
                Months Ended June 30,****2005**
            
            **2004**Revenues
            
            $
            2,594
            
            
            100
            %
            $
            2,453
            
            
            100
            %Costs
                and expenses:Operating
                (excluding depreciation and amortization)
            
            
            1,128
            
            
            44
            %
            
            1,027
            
            
            42
            %Selling,
                general and administrative
            
            
            493
            
            
            19
            %
            
            483
            
            
            19
            %Depreciation
                and amortization
            
            
            759
            
            
            29
            %
            
            734
            
            
            30
            %Asset
                impairment charges
            
            
            39
            
            
            2
            %
            
            --
            
            
            --(Gain)
                loss on sale of assets, net
            
            
            4
            
            
            --
            
            
            (104
            )
            
            (4
            )%Option
                compensation expense, net
            
            
            8
            
            
            --
            
            
            26
            
            
            1
            %Special
                charges, net
            
            
            2
            
            
            --
            
            
            97
            
            
            4
            %2,433
            
            
            94
            %
            
            2,263
            
            
            92
            %Income
                from operations
            
            
            161
            
            
            6
            %
            
            190
            
            
            8
            %Interest
                expense, net
            
            
            (408
            )
            
            
            
            
            (342
            )Gain
                on derivative instruments and hedging activities, net
            
            
            26
            
            
            
            
            
            56Loss
                on extinguishment of debt
            
            
            (6
            )
            
            
            
            
            (21
            )Gain
                on investments
            
            
            21
            
            
            
            
            
            --(367
            )
            
            
            
            
            (307
            )Loss
                before minority interest and income taxes
            
            
            (206
            )
            
            
            
            
            (117
            )Minority
                interest
            
            
            (6
            )
            
            
            
            
            (9
            )Loss
                before income taxes
            
            
            (212
            )
            
            
            
            
            (126
            )Income
                tax expense
            
            
            (8
            )
            
            
            
            
            (4
            )Net
                loss
            
            $
            (220
            )
            
            
            
            $
            (130
            )




***Revenues.*** **** Revenues
      increased by $141 million, or 6%, from $2.5 billion for the six months ended
      June 30, 2004 to $2.6 billion for the six months ended June 30, 2005. This
      increase is principally the result of an increase of 310,800 and 35,400
      high-speed Internet and digital video customers, respectively, as well as price
      increases for video and high-speed Internet services, and is offset partially
      by
      a decrease of 190,100 analog video customers. The cable system sales to Atlantic
      Broadband Finance, LLC, which closed in March and April 2004 (referred to herein
      as the "System Sales") reduced the increase in revenues by $29 million. Our
      goal
      is to increase revenues by improving customer service which we believe will
      stabilize our analog video customer base, implementing price increases on
      certain services and packages and increasing the number of customers who
      purchase high-speed Internet services, digital video and advanced products
      and
      services such as telephone, VOD, high definition television and digital video
      recorder service.





Average
      monthly revenue per analog video customer increased to $72.38 for the six months
      ended June 30, 2005 from $65.39 for the six months ended June 30, 2004 primarily
      as a result of incremental revenues from advanced services and price increases.
      Average monthly revenue per analog video customer represents total revenue
      for
      the six months ended during the respective period, divided by six, divided
      by
      the average number of analog video customers during the respective
      period.





27
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Revenues
      by service offering were as follows (dollars in millions):





**Six
                Months Ended June 30,****2005**
            
            **2004**
            
            **2005
                over 2004****Revenues**
            
            **%
                of**
              **Revenues**
            
            **Revenues**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**Video
            
            $
            1,703
            
            
            66
            %
            $
            1,695
            
            
            69
            %
            $
            8
            
            
            --High-speed
                Internet
            
            
            441
            
            
            17
            %
            
            349
            
            
            14
            %
            
            92
            
            
            26
            %Advertising
                sales
            
            
            140
            
            
            5
            %
            
            132
            
            
            5
            %
            
            8
            
            
            6
            %Commercial
            
            
            134
            
            
            5
            %
            
            114
            
            
            5
            %
            
            20
            
            
            18
            %Other
            
            
            176
            
            
            7
            %
            
            163
            
            
            7
            %
            
            13
            
            
            8
            %$
            2,594
            
            
            100
            %
            $
            2,453
            
            
            100
            %
            $
            141
            
            
            6
            %





Video
      revenues consist primarily of revenues from analog and digital video services
      provided to our non-commercial customers. Video revenues increased by $8 million
      for the six months ended June 30, 2005 compared to the six months ended June
      30,
      2004. Approximately $68 million of the increase was the result of price
      increases and incremental video revenues from existing customers and
      approximately $8 million resulted from an increase in digital video customers.
      The increases were offset by decreases of approximately $21 million resulting
      from the System Sales and approximately an additional $47 million related to
      a
      decrease in analog video customers.





Revenues
      from high-speed Internet services provided to our non-commercial customers
      increased $92 million, or 26%, from $349 million for the six months ended June
      30, 2004 to $441 million for the six months ended June 30, 2005.
      Approximately $68 million of the increase related to the increase in the average
      number of customers receiving high-speed Internet services, whereas
      approximately $27 million related to the increase in average price of the
      service. The increase in high-speed Internet revenues was reduced by
      approximately $3 million as a result of the System Sales.





Advertising
      sales revenues consist primarily of revenues from commercial advertising
      customers, programmers and other vendors. Advertising sales increased $8
      million, or 6%, from $132 million for the six months ended June 30, 2004 to
      $140
      million for the six months ended June 30, 2005, primarily as a result of an
      increase in new advertising sales customers and in advertising rates. The
      increase was offset by a decrease of $1 million as a result of the System Sales.
      For the six months ended June 30, 2005 and 2004, we received $7 million and
      $6
      million in advertising sales revenues from vendors.





Commercial
      revenues consist primarily of revenues from cable video and high-speed Internet
      services to our commercial customers. Commercial revenues increased $20 million,
      or 18%, from $114 million for the six months ended June 30, 2004 to $134 million
      for the six months ended June 30, 2005, primarily as a result of an increase
      in
      commercial high-speed Internet revenues. The increase was reduced by
      approximately $2 million as a result of the System Sales.





Other
      revenues consist of revenues from franchise fees, telephone revenue, equipment
      rental, customer installations, home shopping, dial-up Internet service, late
      payment fees, wire maintenance fees and other miscellaneous revenues. Other
      revenues increased $13 million, or 8%, from $163 million for the six months
      ended June 30, 2004 to $176 million for the six months ended June 30, 2005.
      The
      increase was primarily the result of an increase in telephone revenue of $6
      million, installation revenue of $5 million and franchise fees of $4 million
      and
      was partially offset by approximately $2 million as a result of the System
      Sales.





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***Operating
      Expenses*** **.** Operating expenses increased $101 million, or 10%, from $1.0 billion for the
      six
      months ended June 30, 2004 to $1.1 billion for the six months ended June 30,
      2005. The increase in operating expenses was reduced by $12 million as a result
      of the System Sales. Programming costs included in the accompanying condensed
      consolidated statements of operations were $709 million and $663 million,
      representing 29% of total costs and expenses for each of the six months ended
      June 30, 2005 and 2004, respectively. Key expense components as a percentage
      of
      revenues were as follows (dollars in millions):





**Six
                Months Ended June 30,****2005**
            
            **2004**
            
            **2005
                over 2004****Expenses**
            
            **%
                of**
              **Revenues**
            
            **Expenses**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**Programming
            
            $
            709
            
            
            28
            %
            $
            663
            
            
            27
            %
            $
            46
            
            
            7
            %Advertising
                sales
            
            
            50
            
            
            2
            %
            
            48
            
            
            2
            %
            
            2
            
            
            4
            %Service
            
            
            369
            
            
            14
            %
            
            316
            
            
            13
            %
            
            53
            
            
            17
            %$
            1,128
            
            
            44
            %
            $
            1,027
            
            
            42
            %
            $
            101
            
            
            10
            %





Programming
      costs consist primarily of costs paid to programmers for analog, premium,
      digital channels, VOD and pay-per-view programming. The increase in programming
      costs of $46 million, or 7%, for the six months ended June 30, 2005
      over
      the six months ended June 30, 2004 was a result of price increases, particularly
      in sports programming, partially offset by decreases in analog video customers.
      Additionally, the increase in programming costs was reduced by $9 million as
      a
      result of the System Sales. Programming costs were offset by the amortization
      of
      payments received from programmers in support of launches of new channels of
      $18
      million and $28 million for the six months ended June 30, 2005 and 2004,
      respectively. Programming costs for the six months ended June 30, 2004 also
      include a $4 million reduction related to the settlement of a dispute with
      TechTV, Inc. See Note 17 to the condensed consolidated financial
      statements.





Our
      cable
      programming costs have increased in every year we have operated in excess of
      U.S. inflation and cost-of-living increases, and we expect them to continue
      to
      increase because of a variety of factors, including inflationary or negotiated
      annual increases, additional programming being provided to customers and
      increased costs to purchase programming. In 2005, programming costs have and
      we
      expect they will continue to increase at a higher rate than in 2004. These
      costs
      will be determined in part on the outcome of programming negotiations in 2005
      and will likely be subject to offsetting events or otherwise affected by factors
      similar to the ones mentioned in the preceding paragraph. Our increasing
      programming costs will result in declining operating margins for our video
      services to the extent we are unable to pass on cost increases to our customers.
      We expect to partially offset any resulting margin compression from our
      traditional video services with revenue from advanced video services, increased
      high-speed Internet revenues, advertising revenues and commercial service
      revenues.





Advertising
      sales expenses consist of costs related to traditional advertising services
      provided to advertising customers, including salaries, benefits and commissions.
      Advertising sales expenses increased $2 million, or 4%, primarily as a result
      of
      increased salary, benefit and commission costs. Service costs consist primarily
      of service personnel salaries and benefits, franchise fees, system utilities,
      Internet service provider fees, maintenance and pole rent expense. The increase
      in service costs of $53 million, or 17%, resulted primarily from increased
      labor and maintenance costs to support our infrastructure, increased equipment
      maintenance, an increase in franchise fees as a result of increased revenues
      and
      higher fuel prices. The increase in service costs was reduced by $3 million
      as a
      result of the System Sales.


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***Selling,
      General and Administrative Expenses.*** Selling,
      general and administrative expenses increased by $10 million, or 2%, from $483
      million for the six months ended June
      30 ,
      2004 to
      $493 million for the six months ended June
      30 ,
      2005. The
      increase in selling, general and administrative expenses was reduced by $4
      million as a result of the System Sales. Key
      components of expense as a percentage of revenues were as follows (dollars
      in
      millions):





**Six
                Months Ended June 30,****2005**
            
            **2004**
            
            **2005
                over 2004****Expenses**
            
            **%
                of**
              **Revenues**
            
            **Expenses**
            
            **%
                of**
              **Revenues**
            
            **Change**
            
            **%
                Change**General
                and administrative
            
            $
            427
            
            
            16
            %
            $
            416
            
            
            17
            %
            $
            11
            
            
            3
            %Marketing
            
            
            66
            
            
            3
            %
            
            67
            
            
            2
            %
            
            (1
            )
            
            (1
            )%$
            493
            
            
            19
            %
            $
            483
            
            
            19
            %
            $
            10
            
            
            2
            %





General
      and administrative expenses consist primarily of salaries and benefits, rent
      expense, billing costs, call center costs, internal network costs, bad debt
      expense and property taxes. The increase in general and administrative expenses
      of $11 million, or 3%, resulted primarily from increases in professional
      fees of $15 million and salaries and benefits of $13 million, offset by the
      System Sales of $4 million and decreases in bad debt expense of $10
      million.





Marketing
      expenses decreased $1 million, or 1%, as a result of a decrease in
      expenditures as a result of disciplined spending and more targeted marketing
      tactics. We expect marketing expenditures to increase for the remainder of
      2005.





***Depreciation
      and Amortization*** *.* Depreciation
      and amortization expense increased by $25 million, or 3%, from $734
      million for
      the
      six months ended June
      30 ,
      2004 to
      $759
      million for
      the
      six months ended June
      30 ,
      2005 .
      The
      increase in depreciation was related to an increase in capital
      expenditures.





***Asset
      Impairment Charges.*** Asset
      impairment charges for the six months ended June 30, 2005 represent the
      write-down of assets related to three pending cable asset sales to fair value
      less costs to sell. See Note 3 to the condensed consolidated financial
      statements.





***(Gain)
      Loss on Sale of Assets, Net.*** Loss
      on
      sale of assets of $4 million for the six months ended June 30, 2005 primarily
      represents the loss recognized on the disposition of plant and equipment. Gain
      on sale of assets of $104 million for the six months ended June 30, 2004
      primarily represents the pretax gain realized on the sale of systems to Atlantic
      Broadband Finance, LLC which closed on March 1 and April 30, 2004.





***Option
      Compensation Expense, Net*** .
      Option
      compensation expense of $8 million for the six months ended June
      30,
      2005 primarily represents options expensed in accordance with SFAS No. 123, *Accounting
      for Stock-Based Compensation* .
      Option
      compensation expense of $26 million for the six months ended June 30, 2004
      primarily represents the expense of approximately $8 million related to a stock
      option exchange program, under which
      our employees were offered the right to exchange all stock options (vested
      and
      unvested) issued under the 1999 Charter Communications Option Plan and 2001
      Stock Incentive Plan that had an exercise price over $10 per share for shares
      of
      restricted Charter Class A common stock or, in some instances, cash .
      The
      exchange offer closed in February 2004. Additionally, during the six months
      ended June 30, 2004, we recognized approximately $6 million related to the
      performance shares granted under the Charter Long-Term Incentive Program and
      approximately $12 million related to options granted following the adoption
      of Statement
      of Financial Accounting Standards ("SFAS") No. 123, *Accounting
      for Stock-Based Compensation* .





***Special
      Charges, Net*** *.* Special
      charges of $2 million for the six months ended June 30, 2005 represents $4
      million of severance and related costs of our management realignment offset
      by
      approximately $2 million related to an agreed upon cash discount on settlement
      of the consolidated Federal Class Action and Federal Derivative
      Action .
      See "—
      Legal Proceedings." Special charges of $97 million for the six months ended
      June
      30, 2004 represents approximately $85 million as part of the terms set forth
      in
      memoranda of understanding regarding settlement of the consolidated Federal
      Class Action and Federal Derivative Action and approximately $9 million of
      litigation costs related to the tentative settlement of the South Carolina
      national class action suit, which settlements are subject to




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final
      documentation and court approval and approximately $3 million of severance
      and
      related costs of our workforce reduction.





***Interest
      Expense, Net*** . Net
      interest expense increased by $66 million, or 19%, from $342 million for
      the
      six months ended June
      30 ,
      2004 to
      $408 million for
      the
      six months ended June
      30 ,
      2005 .
      The
      increase in net interest expense was a result of an increase in our average
      borrowing rate from 7.06% in
      the
      six months ended June
      30 , 2004
      to
      7.85% in the
      six
      months ended June
      30 ,
      2005 and
      an
      increase of $748 million in average debt outstanding from $9.2 billion for
      the
      six months ended June
      30 ,
      2004 compared
      to $10.0 billion for
      the
      six months ended June
      30 ,
      2005.





***Gain
      on Derivative Instruments and Hedging Activities, Net.*** Net
      gain
      on derivative instruments and hedging activities decreased $30 million from
      $56
      million for the six months ended June 30, 2004 to $26 million for the six months
      ended June 30, 2005. The decrease is primarily a result of a decrease in gains
      on interest rate agreements, which do not qualify for hedge accounting under
      SFAS No. 133, which decreased from $54 million for the six months ended June
      30,
      2004 to $25 million for the six months ended June 30, 2005.





***Loss
      on extinguishment of debt.*** Loss
      on
      extinguishment of debt of $6 million for the six months ended June 30, 2005
      primarily represents approximately $5 million of losses related to the
      redemption of our subsidiary’s, CC V Holdings, LLC, 11.875% notes due 2008. See
      Note 6 to the condensed consolidated financial statements. Loss
      on
      extinguishment of debt of $21 million for the six months ended June 30, 2004
      represents the write-off of deferred financing fees and third party costs
      related to the Charter Communications Operating, LLC ("Charter Operating")
      refinancing in April 2004.





***Gain
      on investments.*** **** Gain
      on
      investments of $21 million for the six months ended June 30, 2005 primarily
      represents a gain
      realized on an exchange of our interest in an equity investee for an investment
      in a larger enterprise .





***Minority
      Interest.*** ** Minority
      interest represents the 2% accretion of the preferred membership interests
      in
      our indirect subsidiary, CC VIII, LLC, and in 2004, the pro rata share of the
      profits and losses of CC VIII, LLC. Effective January 1, 2005, we ceased
      recognizing minority interest in earnings or losses of CC VIII for financial
      reporting purposes until the dispute between Charter and Mr. Allen regarding
      the
      preferred membership interests in CC VIII is resolved. See Note 7 to the
      condensed consolidated financial statements.





***Income
      Tax Expense.*** ** Income
      tax expense of $8 million and $4 million was recognized for the six months
      ended
      June 30, 2005 and 2004, respectively. Income tax expense represents increases
      in
      the deferred tax liabilities and current federal and state income tax expenses
      of certain of our indirect corporate subsidiaries .





***Net
      Loss*** .
      Net
      loss increased by $90 million, from $130 million for the six months ended June
      30 ,
      2004 to
      $220 million for the six months ended June
      30 ,
      2005 as
      a result of the factors described above.





**Liquidity
      and Capital Resources**




***Introduction***




This
      section contains a discussion of our liquidity and capital resources, including
      a discussion of our cash position, sources and uses of cash, access to credit
      facilities and other financing sources, historical financing activities, cash
      needs, capital expenditures and outstanding debt.




***Overview*** ****





Our
      business requires significant cash to fund debt service costs, capital
      expenditures and ongoing operations. We have historically funded our debt
      service costs, operating activities and capital requirements through cash flows
      from operating activities, borrowings under our credit facilities, equity
      contributions from our parent companies, borrowings from our parent companies,
      sales of assets, issuances of debt securities and cash on hand. However, the
      mix
      of funding sources changes from period to period. For the six months ended
      June
      30, 2005, we generated $469 million of net cash flows from operating activities
      after paying cash interest of $390 million. In addition, we used approximately
      $542 million for purchases of property, plant and equipment. Finally, we had
      net
      cash flows used in financing activities of $521 million, which included, among
      other things, approximately $705 million in repayment of borrowings under the
      Charter Operating revolving credit facility. This repayment was the primary
      reason cash on hand decreased by $524 million to $22 million at June 30, 2005.
      We expect that our mix of sources of funds will




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continue
      to change in the future based on overall needs relative to our cash flow and
      on
      the availability of funds under our credit facilities, our access to the debt
      markets, the timing of possible asset sales and our ability to generate cash
      flows from operating activities. We continue to explore asset dispositions
      as
      one of several possible actions that we could take in the future to improve
      our
      liquidity, but we do not presently consider future asset sales as a significant
      source of liquidity.





We
      expect
      that cash on hand, cash flows from operating activities and the amounts
      available under our credit facilities will be adequate to meet our and our
      parent companies’ cash needs for
      the
      remainder of 2005.
      Cash flows from operating activities and amounts available under our credit
      facilities may not be sufficient to fund our operations and satisfy our and
      our
      parent companies’ principal repayment obligations that come due in 2006 and, we
      believe, such amounts will not be sufficient to fund our operations and satisfy
      such repayment obligations thereafter.





It
      is
      likely that we and our parent companies’ will require additional funding to
      repay debt maturing after 2006. We have been advised that Charter is working
      with its financial advisors to address such funding requirements. However,
      there
      can be no assurance that such funding will be available to us. Although Mr.
      Allen and his affiliates have purchased equity from Charter
      and Charter Holdco in the
      past, Mr. Allen and his affiliates are not obligated to purchase equity from,
      contribute to or loan funds to us
      or our
      parent companies in the
      future.





***Credit
      Facilities and Covenants***





Our
      ability to operate depends upon, among other things, our continued access to
      capital, including credit under the Charter Operating credit facilities. These
      credit facilities, along with our indentures, contain certain restrictive
      covenants, some of which require us to maintain specified financial ratios
      and
      meet financial tests and to provide audited financial statements with an
      unqualified opinion from our independent auditors. As of June 30, 2005, we
      were
      in compliance with the covenants under our indentures and credit facilities
      and
      we expect to remain in compliance with those covenants for the next twelve
      months. As of June 30, 2005, we had borrowing availability under our credit
      facilities of $870 million, none of which was restricted due to covenants.
      Continued access to our credit facilities is subject to our remaining in
      compliance with the covenants of these credit facilities, including covenants
      tied to our operating performance. If our operating performance results in
      non-compliance with these covenants, or if any of certain other events of
      non-compliance under these credit facilities or indentures governing our debt
      occurs, funding under the credit facilities may not be available and defaults
      on
      some or potentially all of our debt obligations could occur. An event of default
      under the covenants governing any of our debt instruments could result in the
      acceleration of our payment obligations under that debt and, under certain
      circumstances, in cross-defaults under our other debt obligations, which could
      have a material adverse effect on our consolidated financial condition and
      results of operations.





The
      Charter Operating credit facilities required us to redeem the CC V Holdings,
      LLC
      notes as a result of the Charter Holdings leverage ratio becoming less than
      8.75
      to 1.0. In satisfaction of this requirement, in March 2005, CC V Holdings,
      LLC
      redeemed all of its outstanding notes, at 103.958% of principal amount, plus
      accrued and unpaid interest to the date of redemption. The total cost of the
      redemption including accrued and unpaid interest was approximately $122 million.
      We funded the redemption with borrowings under the Charter Operating credit
      facilities.





***Parent
      Companies’ Debt Obligations***





Any
      financial or liquidity problems of our parent companies could cause serious
      disruption to our business and have a material adverse effect on our business
      and results of operations. A failure by Charter Holdings to satisfy its debt
      payment obligations or a bankruptcy filing with respect to Charter Holdings
      would give the lenders under the Charter Operating credit facilities the right
      to accelerate the payment obligations under these facilities. Any such
      acceleration would be a default under the indenture governing our notes. A s
      of June
      30, 2005, Charter had approximately $888 million principal amount of senior
      convertible notes outstanding with approximately $25 million and $863 million
      maturing in 2006 and 2009, respectively. During
      the six months ended June 30, 2005, we distributed $367 million to Charter
      Holdings of which $60 million was subsequently distributed to Charter
      Holdco. As of
      June 30, 2005, Charter Holdco was owed $62 million in intercompany loans from
      its subsidiaries, which amount was available to pay interest and principal
      on
      Charter's convertible senior notes.  In
      addition, Charter has $122 million of governmental securities pledged as
      security for the next five semi-annual interest payments on Charter ' s
      5.875%
      convertible senior notes.





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A s
      of June
      30, 2005, Charter Holdings had approximately $8.5 billion principal amount
      of
      high-yield notes outstanding with approximately $105 million, $3.4 billion
      and
      $5.0 billion maturing in 2007, 2009 and thereafter, respectively. Charter and
      Charter Holdings will need to raise additional capital or receive distributions
      or payments from us in order to satisfy their debt obligations. However, because
      of their significant indebtedness, the ability of the parent companies to raise
      additional capital at reasonable rates is uncertain. Distributions by Charter’s
      subsidiaries to a parent company (including Charter, Charter Holdco and Charter
      Holdings) for
      payment of principal on the parent companies’ debt obligations ,
      however, are restricted by the indentures governing the CCH II notes, CCO
      Holdings, LLC ("CCO Holdings") notes, and Charter Operating notes, unless
      under their respective indentures there is no default and a specified leverage
      ratio test is met at the time of such event.





In
      accordance with the registration rights agreement entered into with their
      initial sale, Charter was required to register for resale by April 21, 2005
      its
      5.875% convertible senior notes due 2009, issued in November 2004. Since these
      convertible notes were not registered by that date, Charter paid or will pay
      liquidated damages totaling $0.5 million through July 14, 2005, the day prior
      to
      the effective date of the registration statement. In addition, in accordance
      with the share lending agreement entered into in connection with the initial
      sale of Charter’s 5.875% convertible senior notes due 2009, Charter was required
      to register by April 1, 2005 150
      million shares of its Class A common stock that Charter was obligated to lend
      to
      Citigroup Global Markets Limited ("CGML") at CGML’s request .
      Because
      this registration statement was not declared effective by such date, Charter
      paid or will pay liquidated damages totaling $11 million from April 2, 2005
      through July 17, 2005, the day before the effective date of the registration
      statement. The
      liquidated damages were recorded as interest expense in Charter’s condensed
      consolidated statements of operations.





***Specific
      Limitations at Charter Holdings***





The
      indentures governing the Charter Holdings notes permit Charter Holdings to
      make
      distributions to Charter Holdco for payment of interest or principal on the
      convertible senior notes, only if, after giving effect to the distribution,
      Charter Holdings can incur additional debt under the leverage ratio of 8.75
      to
      1.0, there is no default under Charter Holdings' indentures and other specified
      tests are met. For the quarter ended June 30, 2005, there was no default under
      Charter Holdings' indentures and other specified tests were met. However,
      Charter Holdings did not meet the leverage ratio of 8.75 to 1.0 based on June
      30 ,
      2005 financial
      results. As a result, distributions from Charter Holdings to Charter or Charter
      Holdco are currently
      restricted and will continue to be restricted until that test is met. During
      this restriction period ,
      the
      indentures governing the Charter Holdings notes permit Charter Holdings and
      its
      subsidiaries to make specified investments in Charter Holdco or Charter, up
      to
      an amount determined by a formula, as long as there is no default under the
      indentures.





In
      the
      past, our parent companies have accessed the equity and high-yield debt markets
      as a source of capital to fund their subsidiaries' operations. We believe that
      our parent companies' continued access to the debt markets will depend on market
      conditions in light of, among other things, their significant levels of debt,
      their debt ratings, general economic conditions, and the business condition
      of
      the cable, telecommunications and technology industry. If they are unable to
      raise the required capital on reasonable terms, our parent companies could
      elect
      to cause us to distribute or otherwise pay to them (to the extent available
      and
      permitted by the indentures governing our notes) the necessary funds to pay
      principal and interest amounts due on Charter's or Charter Holdings' debt,
      which
      could negatively impact our liquidity. If, at any time, additional capital
      or
      borrowing capacity is required beyond amounts internally generated or available
      under our credit facilities or through additional debt financings, we would
      consider:





·
            issuing
                debt or equity at the parent companies, the proceeds of which could
                be
                loaned or contributed to us;





·
            issuing
                debt securities that may have structural or other priority over our
                existing notes;





·
            further
                reducing our expenses and capital expenditures, which may impair
                our
                ability to increase revenue;





·
            selling
                assets; or





·
            requesting
                waivers or amendments with respect to our credit facilities, the
                availability and terms of which would be subject to market
                conditions.





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If
      the
      above strategies are not successful, we could be forced to restructure our
      obligations or seek protection under the bankruptcy laws. In addition, if we
      find it necessary to engage in a recapitalization or other similar transaction,
      our noteholders might not receive principal and interest payments to which
      they
      are contractually entitled.





***Sale
      of Assets***





In
      March
      2004, we closed the sale of certain cable systems in Florida, Pennsylvania,
      Maryland, Delaware and West Virginia to Atlantic Broadband Finance, LLC. We
      closed the sale of an additional cable system in New York to Atlantic Broadband
      Finance, LLC in April 2004. The total net proceeds from the sale of all of
      these
      systems were approximately $735 million. The proceeds were used to repay a
      portion of amounts outstanding under our revolving credit facility.





***Long-Term
      Debt***





As
      of June
      30,
      2005 and
      December 31, 2004, long-term debt totaled approximately $10.0 billion and $9.9
      billion, respectively. This debt was comprised of approximately $5.4 billion
      and
      $5.5 billion of
      credit
      facility debt and $4.6
      billion and $4.4 billion accreted value of high-yield notes, respectively.
      As of June
      30,
      2005 and
      December 31, 2004, the weighted average interest rate on the credit facility
      debt was approximately 7.2% and 6.8%, respectively, and the weighted average
      interest rate on the high-yield notes was approximately 8.9% and 8.9%,
      respectively, resulting in a blended weighted average interest rate of 8.0%
      and
      7.8%, respectively. The
      interest rate on approximately 63% and 66% of the total principal amount of
      our
      debt was effectively fixed, including the effects of our interest rate hedge
      agreements as of June 30, 2005 and December 31, 2004, respectively.





***Issuance
      of Charter Operating Notes in Exchange for Charter Holdings Notes.*** In
      March
      and June 2005, our subsidiary, Charter Operating, consummated exchange
      transactions with a small number of institutional holders of Charter Holdings
      8.25% Senior Notes due 2007 pursuant to which Charter Operating issued, in
      private placement, approximately $333 million principal amount of its 8.375%
      senior second lien Notes due 2014 in exchange for approximately $346 million
      of
      the Charter Holdings 8.25% senior notes due 2007. The Charter Holdings notes
      received in the exchange were thereafter distributed to Charter Holdings and
      cancelled.





***CC
      V Holdings, LLC Notes.*** The
      Charter Operating credit facilities required us to redeem the CC V Holdings,
      LLC
      notes as a result of the Charter Holdings leverage ratio becoming less than
      8.75
      to 1.0. In satisfaction of this requirement, in March
      2005, CC V Holdings, LLC redeemed all of its 11.875% notes due 2008, at 103.958%
      of principal amount, plus accrued and unpaid interest to the date of redemption.
      The total cost of redemption was approximately $122 million and was funded
      through borrowings under our credit facilities. Following
      such redemption, CC V Holdings, LLC and its subsidiaries (other than
      non-guarantor subsidiaries) guaranteed the Charter Operating credit facilities
      and granted a lien on all of their assets as to which a lien can be perfected
      under the Uniform Commercial Code by the filing of a financing
      statement.





***Historical
      Operating, Financing and Investing Activities***





We
      held
      $22 million in cash and cash equivalents as of June 30, 2005 compared
      to
      $546 million as of December 31, 2004. The decrease in cash and cash
      equivalents reflects the repayment of approximately $705 million of borrowings
      under our revolving credit facilities.




***Operating
      Activities.*** ** Net
      cash
      provided by operating activities increased $67 million, or 17%, from $402
      million for the six months ended June 30, 2004 to $469 million for the six
      months ended June 30, 2005. For the six months ended June 30, 2005, net cash
      provided by operating activities increased primarily as a result of changes
      in
      operating assets and liabilities that used $85 million less cash during the
      six
      months ended June 30, 2005 than the corresponding period in 2004 combined with
      an increase in revenue over cash costs year over year partially offset by an
      increase in cash interest expense of $60 million over the corresponding prior
      period.




***Investing
      Activities.*** ** Net
      cash
      used by investing activities for the six months ended June 30, 2005 was $472
      million and net cash provided by investing activities for the six months ended
      June 30, 2004 was $307 million. Investing activities used $779 million more
      cash
      during the six months ended June 30, 2005 than the corresponding period in
      2004
      primarily as a result of proceeds from the sale of
      certain cable systems to Atlantic Broadband Finance, LLC in 2004 and
      increased cash used for capital expenditures in 2005.




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***Financing
      Activities.*** ** Net
      cash
      used in financing activities decreased $185 million from $706 million for the
      six months ended June 30, 2004 to $521 million for the six months ended June
      30,
      2005. The decrease in cash used during the six months ended June 30, 2005 as
      compared to the corresponding period in 2004, was primarily the result of a
      decrease in payments for debt issuance costs and in net repayments of long-term
      debt offset partially by an increase in distributions to parent
      company.





***Capital
      Expenditures*** ****





We
      have
      significant ongoing capital expenditure requirements. Capital expenditures
      were
      $542 million and $380 million for the six months ended June
      30,
      2005 and
      2004, respectively. In addition, Charter Holdco transferred $139 million of
      property, plant and equipment to us. Capital expenditures increased as a result
      of increased spending on support capital related to our investment in service
      improvements; scalable infrastructure related to telephone services, VOD and
      digital simulcast; and customer premise equipment primarily related to the
      continued demand for advanced digital set-tops. See the table below for more
      details.




Upgrading
      our cable systems has enabled us to offer digital television, high-speed
      Internet services, VOD, interactive services, additional channels and tiers,
      and
      expanded pay-per-view options to a larger customer base. Our capital
      expenditures are funded primarily from cash flows from operating activities,
      the
      issuance of debt and borrowings under credit facilities. In addition, during
      the
      six months ended June
      30,
      2005 and
      2004, our liabilities related to capital expenditures increased $48 million
      and
      decreased $38 million, respectively.





During
      2005, we expect capital expenditures to be approximately $1 billion. The
      increase in capital expenditures for 2005 compared to 2004 is the result of
      expected increases in telephone services and deployment of advanced digital
      boxes. We expect that the nature of these expenditures will continue to be
      composed primarily of purchases of customer premise equipment, support capital
      and for scalable infrastructure costs. We expect to fund capital expenditures
      for 2005 primarily from cash flows from operating activities and borrowings
      under our credit facilities.




We
      have
      adopted capital expenditure disclosure guidance, which was developed by eleven
      publicly traded cable system operators, including Charter, with the support
      of
      the National Cable & Telecommunications Association ("NCTA"). The disclosure
      is intended to provide more consistency in the reporting of operating statistics
      in capital expenditures and customers among peer companies in the cable
      industry. These disclosure guidelines are not required disclosure under GAAP,
      nor do they impact our accounting for capital expenditures under GAAP.





The
      following table presents our major capital expenditures categories in accordance
      with NCTA disclosure guidelines for the three and six months ended June 30,
      2005
      and 2004 (dollars in millions):





**Three
                Months Ended June 30,**
            
            **Six
                Months Ended June 30,****2005**
            
            **2004**
            
            **2005**
            
            **2004**Customer
                premise equipment (a)
            
            $
            142
            
            $
            105
            
            $
            228
            
            $
            217Scalable
                infrastructure (b)
            
            
            47
            
            
            14
            
            
            89
            
            
            33Line
                extensions (c)
            
            
            48
            
            
            35
            
            
            77
            
            
            60Upgrade/Rebuild
                (d)
            
            
            12
            
            
            6
            
            
            22
            
            
            18Support
                capital (e)
            
            
            82
            
            
            33
            
            
            126
            
            
            52Total
                capital expenditures (f)
            
            $
            331
            
            $
            193
            
            $
            542
            
            $
            380





(a)
            Customer
                premise equipment includes costs incurred at the customer residence
                to
                secure new customers, revenue units and additional bandwidth revenues.
                It
                also includes customer installation costs in accordance with SFAS
                51 and
                customer premise equipment (e.g., set-top terminals and cable modems,
                etc.).


(b)
            Scalable
                infrastructure includes costs, not related to customer premise equipment
                or our network, to secure growth of new customers, revenue units
                and
                additional bandwidth revenues or provide service enhancements (e.g.,
                headend equipment).


(c)
            Line
                extensions include network costs associated with entering new service
                areas (e.g., fiber/coaxial cable, amplifiers, electronic equipment,
                make-ready and design engineering).


(d)
            Upgrade/rebuild
                includes costs to modify or replace existing fiber/coaxial cable
                networks,
                including betterments.


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  (e)
              Support
                  capital includes costs associated with the replacement or enhancement
                  of
                  non-network assets due to technological and physical obsolescence
                  (e.g.,
                  non-network equipment, land, buildings and
                  vehicles).


(f)
              Represents
                  all capital expenditures made during the three and six months ended
                  June
                  30, 2005 and 2004,
                  respectively.




**Certain
      Trends and Uncertainties**





The
      following discussion highlights a number of trends and uncertainties, in
      addition to those discussed elsewhere in this quarterly report and in the " Critical
      Accounting Policies and Estimates " section
      of Item 7. " Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations " in our
      2004 Annual Report on Form 10-K, that could materially impact our business,
      results of operations and financial condition.





***Restrictive
      Covenants.*** ** Our
      credit facilities and the indentures governing our and our subsidiaries’ other
      debt contain a number of significant covenants that could adversely impact
      our
      ability to operate our business, and therefore could adversely affect our
      results of operations. These covenants restrict our and our subsidiaries’
      ability to:





·incur
                additional debt;·repurchase
                or redeem equity interests and debt;·issue
                equity;·make
                certain investments or acquisitions;·pay
                dividends or make other distributions;·dispose
                of assets or merge;·enter
                into related party transactions;·grant
                liens; and·pledge
                assets.





Furthermore,
      our credit facilities require us to, among other things, maintain specified
      financial ratios, meet specified financial tests and provide audited financial
      statements with an unqualified opinion from our independent auditors. Our
      ability to comply with these provisions may be affected by events beyond our
      control.





The
      breach of any covenants or obligations in the foregoing indentures or credit
      facilities, not otherwise waived or amended, could result in a default under
      the
      applicable debt agreement or instrument and could trigger acceleration of the
      related debt, which in turn could trigger defaults under other agreements
      governing our long-term indebtedness. In addition, the secured lenders under
      the
      Charter Operating credit facilities and the Charter Operating senior second-lien
      notes could foreclose on their collateral, which includes equity interests
      in
      our subsidiaries, and exercise other rights of secured creditors. Any default
      under those credit facilities, the indentures governing our convertible notes
      or
      our subsidiaries’ debt could adversely affect our growth, our financial
      condition and our results of operations and our ability to make payments on
      our
      notes and the credit facilities and other debt of our subsidiaries. For more
      information, see the section above entitled "— Liquidity and Capital
      Resources."





***Parent
      Companies’ Liquidity Concerns*** **.** Our
      parent companies have a significant amount of debt and may incur additional
      debt
      in the future. At June 30, 2005, Charter had approximately $25 million and
      $863
      million aggregate principal amount of convertible senior notes outstanding,
      which mature in 2006 and 2009, respectively, and Charter Holdings had
      approximately $8.5 billion aggregate principal amount of senior notes and senior
      discount notes, some of which mature in 2007 and the remainder of which mature
      in 2009 through 2012. Charter and Charter Holdings will need to raise additional
      capital or receive distributions or payments from us in order to satisfy its
      debt obligations.





Charter’s
      ability to make interest payments on its convertible senior notes, and, in
      2006
      and 2009, to repay the outstanding principal of its convertible senior notes,
      will depend on its ability to raise additional capital and/or on receipt of
      payments or distributions from Charter Holdco or its subsidiaries, including
      CCH
      II, CCO Holdings and Charter Operating. Distributions
      by Charter’s subsidiaries to a parent company (including Charter, Charter Holdco
      and Charter Holdings) for
      payment of principal on Charter’s convertible senior notes ,
      however, are restricted by the indentures governing the CCH II notes, CCO
      Holdings notes, and Charter Operating notes, unless
      under their respective indentures there is no default and a specified leverage
      ratio test is met at the time of such event. During the six months ended June
      30, 2005, we distributed $367 million to Charter Holdings of which $60 million
      was subsequently distributed to Charter Holdco. As of
      June 30, 2005, Charter Holdco was owed $62 million in




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intercompany
      loans from its subsidiaries, which amount was available to pay interest and
      principal on Charter's convertible senior notes.  In
      addition, Charter has $122 million of governmental securities pledged as
      security for the next five semi-annual interest payments on Charter’s 5.875%
      convertible senior notes.





The
      indentures governing the Charter Holdings notes permit Charter Holdings to
      make
      distributions to Charter Holdco for payment of interest or principal on the
      convertible senior notes, only if, after giving effect to the distribution,
      Charter Holdings can incur additional debt under the leverage ratio of 8.75
      to
      1.0, there is no default under Charter Holdings' indentures and other specified
      tests are met. For the quarter ended June 30, 2005, there was no default under
      Charter Holdings' indentures and other specified tests were met. However,
      Charter Holdings did not meet the leverage ratio of 8.75 to 1.0 based on June
      30 ,
      2005 financial
      results. As a result, distributions from Charter Holdings to Charter or Charter
      Holdco are currently
      restricted and will continue to be restricted until that test is met. During
      this restriction period ,
      the
      indentures governing the Charter Holdings notes permit Charter Holdings and
      its
      subsidiaries to make specified investments in Charter Holdco or Charter, up
      to
      an amount determined by a formula, as long as there is no default under the
      indentures.





Because
      Charter is our manager, any financial or liquidity problems of Charter could
      cause serious disruption to our business and have a material adverse effect
      on
      our business and results of operations. Any such event could adversely impact
      our own credit rating, and our relations with customers and suppliers, which
      could in turn further impair our ability to obtain financing and operate our
      business. Further, to the extent that any such event results in a change of
      control of Charter (whether through a bankruptcy, receivership or other
      reorganization of Charter and/or Charter Holdco, or otherwise), it could result
      in an event of default under our credit facilities and would require a change
      of
      control repurchase offer under our outstanding notes.





***Acceleration
      of Indebtedness of Our Subsidiaries.*** ** In
      the
      event of a default under our credit facilities or notes, our creditors could
      elect to declare all amounts borrowed, together with accrued and unpaid interest
      and other fees, to be due and payable. In such event, our credit facilities
      and
      indentures would not permit CCH II’s subsidiaries to distribute funds to CCH II
      to pay interest or principal on its notes. If the amounts outstanding under
      such
      credit facilities or notes are accelerated, all of the debt and liabilities
      of
      CCH II’s subsidiaries would be payable from the subsidiaries’ assets, prior to
      any distribution of the subsidiaries’ assets to pay the interest and principal
      amounts on CCH II’s notes. In addition, the lenders under our credit facilities
      could foreclose on their collateral, which includes equity interests in CCH
      II’s
      subsidiaries, and they could exercise other rights of secured creditors. In
      any
      such case, we might not be able to repay or make any payments on our notes.
      Additionally, an acceleration or payment default under our credit facilities
      would cause a cross-default in the indentures governing the Charter Holdings
      notes, CCH II notes, CCO Holdings notes, Charter Operating notes and Charter’s
      convertible senior notes and would trigger the cross-default provision of the
      Charter Operating credit agreement. Any default under any of our credit
      facilities or notes might adversely affect the holders of our notes and our
      growth, financial condition and results of operations and could force us to
      examine all options, including seeking the protection of the bankruptcy laws.




***CCH
      II Relies on its Subsidiaries to Meet its Liquidity Needs, and CCH II’s Notes
      are Structurally Subordinated to all Liabilities of its
      Subsidiaries.***  ** We
      rely
      on our subsidiaries to make distributions or other payments to CCH II to enable
      CCH II to make payments on its notes. The borrowers and guarantors under the
      Charter Operating credit facilities and senior second-lien notes are CCH II’s
      indirect subsidiaries. A number of CCH II’s subsidiaries are also obligors under
      other debt instruments, including CCO Holdings and Charter Operating, which
      are
      each a co-issuer of senior notes and/or senior discount notes. As of June 30,
      2005, our total debt was approximately $10.0 billion, of which $8.4 billion
      was
      structurally senior to the CCH II notes. The Charter Operating credit facilities
      and the indentures governing the senior notes, senior discount notes and senior
      second-lien notes issued by subsidiaries of CCH II contain restrictive covenants
      that limit the ability of such subsidiaries to make distributions or other
      payments to CCH II.





In
      the
      event of a default under our credit facilities or notes, our lenders or
      noteholders could elect to declare all amounts borrowed, together with accrued
      and unpaid interest and other fees, to be due and payable. An acceleration
      or
      certain payment events of default under our credit facilities would cause a
      cross-default in the indentures governing the Charter Holdings notes, CCH II
      notes, CCO Holdings notes, Charter Operating notes and Charter’s convertible
      senior notes. Similarly, such a default or acceleration under any of these
      notes
      would cause a cross-default under the notes of the parent entities of the
      relevant entity. If the amounts outstanding under the credit facilities or
      notes
      are accelerated, all of the debt and liabilities of CCH II’s subsidiaries would
      be payable from the subsidiaries’ assets, prior to any distribution of the
      subsidiaries’ assets to pay the interest and principal amounts on CCH II’s
      notes. In addition, the




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lenders
      under our credit facilities and noteholders under our Charter Operating notes
      could foreclose on their collateral, which includes equity interests in CCH
      II’s
      subsidiaries, and they could exercise other rights of secured creditors. Any
      default under any of our credit facilities or notes could force us to examine
      all options, including seeking the protection of the bankruptcy laws. In
      the
      event of the bankruptcy, liquidation or dissolution of a subsidiary, following
      payment by such subsidiary of its liabilities, the lenders under our credit
      facilities and the holders of the other debt instruments and all other creditors
      of CCH II’s subsidiaries would have the right to be paid before holders of CCH
      II’s notes from any of CCH II’s subsidiaries’ assets. Such subsidiaries may not
      have sufficient assets remaining to make any payments to CCH II as an equity
      holder or otherwise and may be restricted by bankruptcy and insolvency laws
      from
      making any such payments.





The
      foregoing contractual and legal restrictions could limit CCH II’s ability to
      make payments of principal and/or interest to the holders of its notes. Further,
      if CCH II made such payments by causing a subsidiary to make a distribution
      to
      it, and such transfer were deemed a fraudulent transfer or an unlawful
      distribution, the holders of CCH II’s notes could be required to return the
      payment to (or for the benefit of) the creditors of its
      subsidiaries.




***Securities
      Litigation.*** A
      number
      of putative federal class action lawsuits were filed against Charter and certain
      of its former and present officers and directors alleging violations of
      securities laws, which have been consolidated for pretrial purposes. In
      addition, a number of shareholder derivative lawsuits were filed against Charter
      in the same and other jurisdictions. A shareholders derivative suit was filed
      in
      the U.S. District Court for the Eastern District of Missouri against Charter
      and
      its then current directors. Also, three shareholders derivative suits were
      filed
      in Missouri state court against Charter, its then current directors and its
      former independent auditor. These state court actions have been consolidated.
      The federal shareholders derivative suit and the consolidated derivative suit
      each alleged that the defendants breached their fiduciary duties.





Charter
      entered into Stipulations of Settlement setting forth proposed terms of
      settlement for the above-described class actions and derivative suits. On
      May 23, 2005 the United States District Court for the Eastern District
      of
      Missouri conducted the final fairness hearing for the Actions, and on
      June 30, 2005, the Court issued its final approval of the settlements.
      Members of the class had 30 days from the issuance of the June 30 order
      approving the settlement to file an appeal challenging the approval. Two notices
      of appeal were filed relating to the settlement, but Charter does not yet know
      the specific issues presented by such appeals, nor have briefing schedules
      been
      set. See "Part II, Item 1. Legal Proceedings."





Moreover,
      due to (i) the inherent uncertainties of litigation and investigations, (ii)
      the
      remaining conditions to the finalization of our anticipated settlements, (iii)
      the possibility of appeals and objections to the settlements and (iv) the need
      for us to comply with, and/or otherwise implement certain covenants, conditions,
      undertakings, procedures and other obligations that would be or have been
      imposed under the terms of the settlements, Charter cannot predict with
      certainty the ultimate outcome of these proceedings. An unfavorable outcome
      in
      the lawsuits described above could result in substantial potential liabilities
      and have a material adverse effect on our consolidated financial condition
      and
      results of operations or our liquidity. Further, these proceedings, and our
      actions in response to these proceedings, could result in substantial additional
      defense costs and the diversion of management’s attention, and could adversely
      affect our ability to execute our business and financial
      strategies.





***Competition.*** The
      industry in which we operate is highly competitive, and has become more so
      in
      recent years. In some instances, we compete against companies with fewer
      regulatory burdens, easier access to financing, greater personnel resources,
      greater brand name recognition and long-established relationships with
      regulatory authorities and customers. Increasing consolidation in the cable
      industry and the repeal of certain ownership rules may provide additional
      benefits to certain of our competitors, either through access to financing,
      resources or efficiencies of scale.





Our
      principal competitor for video services throughout our territory is direct
      broadcast satellite television services, also known as DBS. Competition from
      DBS, including intensive marketing efforts, aggressive pricing, and the ability
      of DBS to provide certain services that we are in the process of developing,
      has
      had an adverse impact on our ability to retain customers. DBS has grown rapidly
      over the last several years and continues to do so. The cable industry,
      including Charter, has lost a significant number of subscribers to DBS
      competition, and we face serious challenges in this area in the future. We
      believe that competition from DBS service providers may present greater
      challenges in areas of lower population density, and that our systems serve
      a
      higher concentration of such areas than those of other major cable service
      providers.





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Local
      telephone companies and electric utilities can offer video and other services
      in
      competition with us, and they increasingly may do so in the future. Certain
      telephone companies have begun more extensive deployment of fiber in their
      networks that will enable them to begin providing video services, as well as
      telephone and high-bandwidth Internet access services, to residential and
      business customers. Some of these telephone companies have obtained, and are
      now
      seeking, franchises or alternative authorizations that are less burdensome
      than
      existing Charter franchises. The subscription television industry also faces
      competition from free broadcast television and from other communications and
      entertainment media. Further loss of customers to DBS or other alternative
      video
      and data services could have a material negative impact on the value of our
      business and its performance.





With
      respect to our Internet access services, we face competition, including
      intensive marketing efforts and aggressive pricing, from telephone companies
      and
      other providers of "dial-up" and digital subscriber line technology, also known
      as DSL. DSL service is competitive with high-speed Internet service over cable
      systems. In addition, DBS providers have entered into joint marketing
      arrangements with Internet access providers to offer bundled video and Internet
      service, which competes with our ability to provide bundled services to our
      customers. In addition, as we expand our telephone offerings, we will face
      considerable competition from established telephone companies.





In
      order
      to attract new customers, from time to time we make promotional offers,
      including offers of temporarily reduced-price or free service. These promotional
      programs result in significant advertising, programming and operating expenses,
      and also require us to make capital expenditures to acquire additional digital
      set-top terminals. Customers who subscribe to our services as a result of these
      offerings may not remain customers for any significant period of time following
      the end of the promotional period. A failure to retain existing customers and
      customers added through promotional offerings or to collect the amounts they
      owe
      us could have an adverse effect on our business and financial
      results.





Mergers,
      joint ventures and alliances among franchised, wireless or private cable
      operators, satellite television providers, telephone companies and others,
      and
      the repeal of certain ownership rules may provide additional benefits to some
      of
      our competitors, either through access to financing, resources or efficiencies
      of scale, or the ability to provide multiple services in direct competition
      with
      us.





***Long-Term
      Indebtedness — Change of Control Payments.*** We and
      our parent companies may not have the ability to raise the funds necessary
      to
      fulfill our obligations under our and our parent companies’ senior and senior
      discount notes and our credit facilities following a change of control. Under
      the indentures governing our parent companies’ notes, upon the occurrence of
      specified change of control events, each such issuer is required to offer to
      repurchase all of its outstanding notes. However, our parent companies may
      not
      have sufficient funds at the time of the change of control event to make the
      required repurchase of the applicable notes and all of the notes issuers are
      limited in their ability to make distributions or other payments to their
      respective parent companies to fund any required repurchase. In addition, a
      change of control under our credit facilities and indentures governing their
      and
      our notes could require the repayment of borrowings under those credit
      facilities and indentures. Because such credit facilities and notes are
      obligations of CCH II’s subsidiaries, the credit facilities and the notes would
      have to be repaid by CCH II’s subsidiaries before their assets could be
      available to CCH II or its parent companies to repurchase CCH II’s and its
      parent companies’ notes. Any failure to make or complete a change of control
      offer would place the applicable issuer or borrower in default under its notes.
      The failure of CCH II’s subsidiaries to make a change of control offer or repay
      the amounts outstanding under their credit facilities would place them in
      default under these agreements and could result in a default under the
      indentures governing the CCH II and its parent companies’ notes. See "— Certain
      Trends and Uncertainties — Liquidity."




***Variable
      Interest Rates.*** At June
      30, 2005, excluding the effects of hedging, approximately 60% of our debt bears
      interest at variable rates that are linked to short-term interest rates. In
      addition, a significant portion of our existing debt, assumed debt or debt
      we
      might arrange in the future will bear interest at variable rates. If interest
      rates rise, our costs relative to those obligations will also rise. As of June
      30, 2005 and December 31, 2004, the weighted average interest rate on
      the
      credit facility debt was approximately 7.2% and 6.8%, respectively, and the
      weighted average interest rate on the high-yield notes was approximately 8.9%
      and 8.9%, respectively, resulting in a blended weighted average interest rate
      of
      8.0% and 7.8%, respectively. The interest rate on approximately 63% and 66%
      of
      the total principal amount of our debt was effectively fixed, including the
      effects of our interest rate hedge agreements as of June 30, 2005 and December
      31, 2004, respectively.




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***Services.*** We
      expect
      that a substantial portion of our near-term growth will be achieved through
      revenues from high-speed Internet services, digital video, bundled service
      packages, and to a lesser extent various commercial services that take advantage
      of cable’s broadband capacity. We may not be able to offer these advanced
      services successfully to our customers or provide adequate customer service
      and
      these advanced services may not generate adequate revenues. Also, if the vendors
      we use for these services are not financially viable over time, we may
      experience disruption of service and incur costs to find alternative vendors.
      In
      addition, the technology involved in our product and service offerings generally
      requires that we have permission to use intellectual property and that such
      property not infringe on rights claimed by others. If it is determined that
      the
      product or service being utilized infringes on the rights of others, we may
      be
      sued or be precluded from using the technology.





***Increasing
      Programming Costs.*** Programming
      has been, and is expected to continue to be, our largest operating expense
      item.
      In recent years, the cable industry has experienced a rapid escalation in the
      cost of programming, particularly sports programming. We expect programming
      costs to continue to increase because of a variety of factors, including
      inflationary or negotiated annual increases, additional programming being
      provided to customers and increased costs to purchase programming. The inability
      to fully pass these programming cost increases on to our customers would have
      an
      adverse impact on our cash flow and operating margins. As measured by
      programming costs, and excluding premium services (substantially all of which
      were renegotiated and renewed in 2003), as of July 7, 2005 approximately 9%
      of
      our current programming contracts were expired, and approximately another 21%
      are scheduled to expire at or before the end of 2005. There can be no assurance
      that these agreements will be renewed on favorable or comparable terms. To
      the
      extent that we are unable to reach agreement with certain programmers on terms
      that we believe are reasonable we may be forced to remove such programming
      channels from our line-up, which could result in a further loss of customers.





***Notes
      Price Volatility.*** The
      market price of our publicly traded notes has been and is likely to continue
      to
      be highly volatile. We expect that the price of our securities may fluctuate
      in
      response to various factors, including the factors described in this section
      and
      various other factors, which may be beyond our control. These factors beyond
      our
      control could include: financial forecasts by securities analysts; new
      conditions or trends in the cable or telecommunications industry; general
      economic and market conditions and specifically, conditions related to the
      cable
      or telecommunications industry; any change in our debt ratings; the development
      of improved or competitive technologies; the use of new products or promotions
      by us or our competitors; changes in accounting rules or interpretations; and
      new regulatory legislation adopted in the United States.





In
      addition, the securities market in general, and the market for cable television
      securities in particular, have experienced significant price fluctuations.
      Volatility in the market price for companies may often be unrelated or
      disproportionate to the operating performance of those companies. These broad
      market and industry factors may seriously harm the market price of our notes,
      regardless of our operating performance. In the past, securities litigation
      has
      often commenced following periods of volatility in the market price of a
      company’s securities, and several purported class action lawsuits were filed
      against Charter in 2001 and 2002, following a decline in its stock
      price.




***Economic
      Slowdown; Global Conflict*** **.** It
      is
      difficult to assess the impact that the general economic slowdown and global
      conflict will have on future operations. However, the economic slowdown has
      resulted and could continue to result in reduced spending by customers and
      advertisers, which could reduce our revenues, and also could affect our ability
      to collect accounts receivable and maintain customers. Reductions in operating
      revenues would likely negatively affect our ability to make expected capital
      expenditures and could also result in our inability to meet our obligations
      under our financing agreements. These developments could also have a negative
      impact on our financing and variable interest rate agreements through
      disruptions in the market or negative market conditions.





***Regulation
      and Legislation*** **.** Cable
      system operations are extensively regulated at the federal, state, and local
      level, including rate regulation of basic service and equipment and municipal
      approval of franchise agreements and their terms, such as franchise requirements
      to upgrade cable plant and meet specified customer service standards. Additional
      legislation and regulation is always possible.





Cable
      operators also face significant regulation of their channel carriage. They
      currently can be required to devote substantial capacity to the carriage of
      programming that they would not carry voluntarily, including certain local
      broadcast signals, local public, educational and government access programming,
      and unaffiliated commercial leased access programming. This carriage burden
      could increase in the future, particularly if cable systems were required to
      carry both the analog and digital versions of local broadcast signals (dual
      carriage) or to carry multiple




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program
      streams included with a single digital broadcast transmission (multicast
      carriage). Additional government mandated broadcast carriage obligations could
      disrupt existing programming commitments, interfere with our preferred use
      of
      limited channel capacity and limit our ability to offer services that would
      maximize customer appeal and revenue potential. Although the FCC issued a
      decision in February 2005, confirming an earlier ruling against mandating either
      dual carriage or multicast carriage, that decision has been appealed. In
      addition, the FCC could reverse its own ruling or Congress could legislate
      additional carriage obligations.





Over
      the
      past several years, proposals have been advanced that would require cable
      operators offering Internet service to provide non-discriminatory access to
      cable’s broadband infrastructure to competing Internet service providers. In a
      June 2005 ruling, commonly referred to as *Brand
      X* ,
      the
      Supreme Court upheld an FCC decision making it less likely that any
      non-discriminatory "open access" requirements (which are generally associated
      with common carrier regulation of "telecommunications services") will be imposed
      on the cable industry by local, state or federal authorities. The Supreme Court
      held that the FCC was correct in classifying cable-provided Internet service
      as
      an "information service," rather than a "telecommunications service." This
      favorable regulatory classification limits the ability of various governmental
      authorities to impose open access requirements on cable-provided Internet
      service. Given the recency of the *Brand
      X* decision,
      however, the nature of any legislative or regulatory response remains uncertain.
      The imposition of open access requirements could materially affect our business.




**Item
      4.** **Controls
      and Procedures.**





As
      of the
      end of the period covered by this report, management, including our Interim
      Chief Executive Officer and Interim Chief Financial Officer, evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures with respect to the information generated for use in this quarterly
      report. The evaluation was based in part upon reports and affidavits provided
      by
      a number of executives. Based upon, and as of the date of that evaluation,
      our
      Interim Chief Executive Officer and Interim Chief Financial Officer concluded
      that the disclosure controls and procedures were effective to provide reasonable
      assurances that information required to be disclosed in the reports we file
      or
      submit under the Securities Exchange Act of 1934 is recorded, processed,
      summarized and reported within the time periods specified in the Commission’s
      rules and forms.





There
      was
      no change in our internal control over financial reporting during the quarter
      ended June 30, 2005 that has materially affected, or is reasonably likely to
      materially affect, our internal control over financial reporting.





In
      designing and evaluating the disclosure controls and procedures, our management
      recognized that any controls and procedures, no matter how well designed and
      operated, can provide only reasonable, not absolute, assurance of achieving
      the
      desired control objectives and management necessarily was required to apply
      its
      judgment in evaluating the cost-benefit relationship of possible controls and
      procedures. Based upon the above evaluation, our management believes that its
      controls provide such reasonable assurances.


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**PART
      II. OTHER INFORMATION.**




**Item
      1.**  **Legal
      Proceedings.**





**Securities
      Class Actions and Derivative Suits**





Fourteen
      putative federal class action lawsuits (the "Federal Class Actions")
      were
      filed against Charter and certain of its former and present officers and
      directors in various jurisdictions allegedly on behalf of all purchasers of
      Charter’s securities during the period from either November 8 or
      November 9, 1999 through July 17 or July 18, 2002. Unspecified
      damages were sought by the plaintiffs. In general, the lawsuits alleged that
      Charter utilized misleading accounting practices and failed to disclose these
      accounting practices and/or issued false and misleading financial statements
      and
      press releases concerning Charter’s operations and prospects. The Federal
      Class Actions were specifically and individually identified in public
      filings made by Charter prior to the date of this quarterly report. On
      March 12, 2003, the Panel transferred the six Federal Class Actions
      not filed in the Eastern District of Missouri to that district for coordinated
      or consolidated pretrial proceedings with the eight Federal Class Actions
      already pending there. The Court subsequently consolidated the Federal
      Class Actions into a single action (the "Consolidated Federal
      Class Action") for pretrial purposes. On August 5, 2004, the
      plaintiff’s representatives, Charter and the individual defendants who were the
      subject of the suit entered into a Memorandum of Understanding setting forth
      agreements in principle to settle the Consolidated Federal Class Action.
      These parties subsequently entered into Stipulations of Settlement dated as
      of
      January 24, 2005 (described more fully below) which incorporate the
      terms
      of the August 5, 2004 Memorandum of Understanding.





The
      Consolidated Federal Class Action is entitled:





·
            In
                re Charter Communications, Inc. Securities Litigation, MDL Docket
                No. 1506
                (All Cases), StoneRidge Investments Partners, LLC, Individually and
                On
                Behalf of All Others Similarly Situated, v. Charter Communications,
                Inc.,
                Paul Allen, Jerald L. Kent, Carl E. Vogel, Kent Kalkwarf, David G.
                Barford, Paul E. Martin, David L. McCall, Bill Shreffler, Chris Fenger,
                James H. Smith, III, Scientific-Atlanta, Inc., Motorola, Inc. and
                Arthur
                Andersen, LLP, Consolidated Case No.
                4:02-CV-1186-CAS.





On
      September 12, 2002, a shareholders derivative suit (the "State Derivative
      Action") was filed in the Circuit Court of the City of St. Louis, State
      of
      Missouri (the "Missouri State Court"), against Charter and its then current
      directors, as well as its former auditors. The plaintiffs alleged that the
      individual defendants breached their fiduciary duties by failing to establish
      and maintain adequate internal controls and procedures.





The
      consolidated State Derivative Action is entitled:





·
            Kenneth
                Stacey, Derivatively on behalf of Nominal Defendant Charter
                Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B.
                Nathanson, Nancy B. Peretsman, William Savoy, John H. Tory, Carl
                E. Vogel,
                Larry W. Wangberg, and Charter Communications, Inc.





On
      March 12, 2004, an action substantively identical to the State Derivative
      Action was filed in Missouri State Court against Charter and certain of its
      current and former directors, as well as its former auditors. On July 14,
      2004, the Court consolidated this case with the State Derivative Action.





This
      action is entitled:





·
            Thomas
                Schimmel, Derivatively on behalf on Nominal Defendant Charter
                Communications, Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B.
                Nathanson, Nancy B. Peretsman, William D. Savoy, John H. Tory, Carl
                E.
                Vogel, Larry W. Wangberg, and Arthur Andersen, LLP, and Charter
                Communications, Inc.





Separately,
      on February 12, 2003, a shareholders derivative suit (the "Federal
      Derivative Action"), was filed against Charter and its then current directors
      in
      the United States District Court for the Eastern District of Missouri. The
      plaintiff in that suit alleged that the individual defendants breached their
      fiduciary duties and grossly mismanaged Charter by failing to establish and
      maintain adequate internal controls and procedures.





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The
      Federal Derivative Action is entitled:





·
            Arthur
                Cohn, Derivatively on behalf of Nominal Defendant Charter Communications,
                Inc., v. Ronald L. Nelson, Paul G. Allen, Marc B. Nathanson, Nancy
                B.
                Peretsman, William Savoy, John H. Tory, Carl E. Vogel, Larry W. Wangberg,
                and Charter Communications, Inc.





As
      noted
      above, Charter and the individual defendants entered into a Memorandum of
      Understanding on August 5, 2004 setting forth agreements in principle
      regarding settlement of the Consolidated Federal Class Action, the State
      Derivative Action(s) and the Federal Derivative Action (the "Actions"). Charter
      and various other defendants in those actions subsequently entered into
      Stipulations of Settlement dated as of January 24, 2005, setting forth
      a
      settlement of the Actions in a manner consistent with the terms of the
      Memorandum of Understanding. The Stipulations of Settlement, along with various
      supporting documentation, were filed with the Court on February 2, 2005.
      On
      May 23, 2005 the United States District Court for the Eastern District
      of
      Missouri conducted the final fairness hearing for the Actions, and on
      June 30, 2005, the Court issued its final approval of the settlements.
      Members of the class had 30 days from the issuance of the June 30 order
      approving the settlement to file an appeal challenging the approval. Two notices
      of appeal were filed relating to the settlement, but Charter does not yet know
      the specific issues presented by such appeals, nor have briefing schedules
      been
      set.





As
      amended, the Stipulations of Settlement provide that, in exchange for a release
      of all claims by plaintiffs against Charter and its former and present officers
      and directors named in the Actions, Charter would pay to the plaintiffs a
      combination of cash and equity collectively valued at $144 million,
      which
      will include the fees and expenses of plaintiffs’ counsel. Of this amount,
      $64 million would be paid in cash (by Charter’s insurance carriers) and the
      $80 million balance was to be paid (subject to Charter’s right to
      substitute cash therefor described below) in shares of Charter Class A
      common stock having an aggregate value of $40 million and ten-year warrants
      to purchase shares of Charter Class A common stock having an aggregate
      warrant value of $40 million, with such values in each case being
      determined pursuant to formulas set forth in the Stipulations of Settlement.
      However, Charter had the right, in its sole discretion, to substitute cash
      for
      some or all of the aforementioned securities on a dollar for dollar basis.
      Pursuant to that right, Charter elected to fund the $80 million obligation
      with 13.4 million shares of Charter Class A common stock (having
      an
      aggregate value of approximately $15 million pursuant to the formula
      set
      forth in the Stipulations of Settlement) with the remaining balance (less an
      agreed upon $2 million discount in respect of that portion allocable
      to
      plaintiffs’ attorneys’ fees) to be paid in cash. In addition, Charter had agreed
      to issue additional shares of its Class A common stock to its insurance
      carrier having an aggregate value of $5 million; however, by agreement
      with
      its carrier Charter has paid $4.5 million in cash in lieu of issuing
      such
      shares. Charter delivered the settlement consideration to the claims
      administrator on July 8, 2005, and it will be held in escrow pending
      any
      appeals of the approval. On July 14, 2005, the Circuit Court for the City of
      St.
      Louis dismissed with prejudice the State Derivative Actions.





As
      part
      of the settlements, Charter has committed to a variety of corporate governance
      changes, internal practices and public disclosures, some of which have already
      been undertaken and none of which are inconsistent with measures Charter is
      taking in connection with the recent conclusion of the SEC
      investigation.





**Government
      Investigations**





In
      August
      2002, Charter became aware of a grand jury investigation being conducted by
      the
      U.S. Attorney’s Office for the Eastern District of Missouri into certain of
      its accounting and reporting practices, focusing on how Charter reported
      customer numbers, and its reporting of amounts received from digital set-top
      terminal suppliers for advertising. The U.S. Attorney’s Office publicly
      stated that Charter was not a target of the investigation. Charter was also
      advised by the U.S. Attorney’s Office that no current officer or member of
      its board of directors was a target of the investigation. On July 24,
      2003,
      a federal grand jury charged four former officers of Charter with conspiracy
      and
      mail and wire fraud, alleging improper accounting and reporting practices
      focusing on revenue from digital set-top terminal suppliers and inflated
      customer account numbers. Each of the indicted former officers pled guilty
      to
      single conspiracy counts related to the original mail and wire fraud charges
      and
      were sentenced April 22, 2005. Charter has advised us that it has fully
      cooperated with the investigation, and following the sentencings, the
      U.S. Attorney’s Office for the Eastern District of Missouri announced that
      its investigation was concluded and that no further indictments would
      issue.





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**Indemnification**





Charter
      was generally required to indemnify, under certain conditions, each of the
      named
      individual defendants in connection with the matters described above pursuant
      to
      the terms of its bylaws and (where applicable) such individual defendants’
      employment agreements. In accordance with these documents, in connection with
      the grand jury investigation, a now-settled SEC investigation and the
      above-described lawsuits, some of Charter’s current and former directors and
      current and former officers have been advanced certain costs and expenses
      incurred in connection with their defense. On February 22, 2005, Charter
      filed suit against four of its former officers who were indicted in the course
      of the grand jury investigation. These suits seek to recover the legal fees
      and
      other related expenses advanced to these individuals. One of these former
      officers has counterclaimed against Charter alleging, among other things, that
      Charter owes him additional indemnification for legal fees that Charter did
      not
      pay and another of these former officers has counterclaimed against Charter
      for
      accrued sick leave.





**Other
      Litigation**





In
      addition to the matters set forth above, Charter is also party to other lawsuits
      and claims that arose in the ordinary course of conducting its business. In
      the
      opinion of management, after taking into account recorded liabilities, the
      outcome of these other lawsuits and claims are not expected to have a material
      adverse effect on our consolidated financial condition, results of operations
      or
      our liquidity.




**Item
      6.**  **Exhibits.**





The
      index
      to the exhibits begins on page 46 of this quarterly report.







44
 Table
          of Contents




**SIGNATURES**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, as amended, CCH
      II,
      LLC and CCH II Capital Corp. have duly caused this quarterly report to be signed
      on their behalf by the undersigned, thereunto duly authorized.





CCH
      II,
      LLC


Registrant


By:
      CHARTER COMMUNICATIONS, INC., Sole Manager





Dated:
                August 5, 2005
            By:/s/
                Paul E. MartinName:
            Paul
                E. MartinTitle:
            *Senior
                Vice President,**Interim
                Chief Financial Officer,**Principal
                Accounting Officer and**Corporate
                Controller**(Principal
                Financial Officer and**Principal
                Accounting Officer)*








CCH
      II
      CAPITAL CORP.


Registrant





Dated:
                August 5, 2005
            By:/s/
                Paul E. MartinName:
            Paul
                E. MartinTitle:
            *Senior
                Vice President,**Interim
                Chief Financial Officer,**Principal
                Accounting Officer and**Corporate
                Controller**(Principal
                Financial Officer and**Principal
                Accounting Officer)*














45
 Table
          of Contents


**EXHIBIT
      INDEX**





ExhibitNumber
            
            Description
                of Document3.1
            
            Certificate
                of Formation of CCH II, LLC (incorporated by reference to Exhibit 3.1
                to Amendment No. 1 to the registration statement on Form S-4
                of CCH
                II, LLC and CCH II Capital Corporation filed on March 24, 2004 (File
                No.
                333-111423)).3.2
            
            Amended
                and Restated Limited Liability Company Agreement of CCH II, LLC,
                dated as
                of July 10, 2003 (incorporated by reference to Exhibit 3.2
                to
                Amendment No. 1 to the registration statement on Form S-4
                of CCH II,
                LLC and CCH II Capital Corporation filed on March 24, 2004 (File
                No.
                333-111423)).3.3
            
            Certificate
                of Incorporation of CCH II Capital Corporation (incorporated by reference
                to Exhibit 3.3 to Amendment No. 1 to the registration statement
                on
                Form S-4 of CCH II, LLC and CCH II Capital Corporation filed
                on March
                24, 2004 (File No. 333-111423)).3.4
            
            Amended
                and Reinstated By-laws of CCH II Capital Corporation (incorporated
                by
                reference to Exhibit 3.4 to Amendment No. 1 to the registration
                statement on Form S-4 of CCH II, LLC and CCH II Capital Corporation
                filed on March 24, 2004 (File No. 333-111423)).4.1
            
            Indenture
                relating to the 10.25% Senior Notes due 2010, dated as of
                September 23, 2003, among CCH II, LLC, CCH II
                Capital
                Corporation and Wells Fargo Bank, National Association, as trustee
                (incorporated by reference to Exhibit 10.1 to the current
                report on
                Form 8-K of Charter Communications Inc. filed on September 26,
                2003 (File No. 000-27927)).10.1
                (a)
            
            Stipulation
                of Settlement, dated as of January 24, 2005, regarding settlement
                of
                Consolidated Federal Class Action entitled In Re Charter Communications,
                Inc. Securities Litigation. (Incorporated by reference to Exhibit
                10.48 tothe
                annual report on Form 10-K filed byCharter
                Communications, Inc. on March 3, 2005 (File No.
                000-27927)).10.1
                (b)
            
            Amendment
                to Stipulation of Settlement, dated as of May 23, 2005, regarding
                settlement of Consolidated Federal Class Action entitled In Re Charter
                Communications, Inc. Securities Litigation. (incorporated by reference
                to
                Exhibit 10.35(b)to
                Amendment No. 3 to the registration statement on Form S-1filed
                by Charter Communications, Inc. on June 8, 2005 (File No.
                333-121186)).10.2+
            
            Employment
                Agreement dated as of April 1, 2005, by and between Michael J. Lovett
                and
                Charter Communications, Inc. (Incorporated by reference to Exhibit
                10.11
                tothe
                quarterly report on Form 10-Q filed byCharter
                Communications, Inc. on May 3, 2005 (File No.
                000-27927)).10.3+
            
            Letter
                Agreement, dated April 15, 2005, by and between Charter Communications,
                Inc. and Paul E. Martin (incorporated by reference to Exhibit 99.1
                to the
                current report on Form 8-K of Charter Communications, Inc. filed
                April 19,
                2005 (File No. 0000-27927)).10.4+
            
            2005
                Executive Cash Award Plan dated as of June 9, 2005 (incorporated
                by
                reference to Exhibit 99.1 to the current report on Form 8-K of Charter
                Communications, Inc. filed June 15, 2005 (File No.
                0000-27927)).10.5+
            
            Restricted
                Stock Agreement, dated as of July 13, 2005, by and between
                Robert P.
                May and Charter Communications, Inc. (incorporated by reference to
                Exhibit 99.1 to the current report on Form 8-K of Charter
                Communications, Inc. filed July 13, 2005 (File
                No. 000-27927)).10.6+
            
            Restricted
                Stock Agreement, dated as of July 13, 2005, by and between
                Michael J.
                Lovett and Charter Communications, Inc. (incorporated by reference
                to
                Exhibit 99.2 to the current report on Form 8-K of Charter
                Communications, Inc. filed July 13, 2005 (File
                No. 000-27927)).31.1*
            
            Certificate
                of Interim Chief Executive Officer pursuant to Rule 13a-14(a)/Rule
                15d-14(a) under the Securities Exchange Act of 1934.31.2*
            
            Certificate
                of Interim Chief Financial Officer pursuant to Rule 13a-14(a)/Rule
                15d-14(a) under the Securities Exchange Act of 1934.32.1*
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Interim Chief Executive Officer).32.2*
            
            Certification
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002 (Interim Chief Financial Officer).








*
      Document attached





+
      Management compensatory plan or arrangement






46